Merchants who receive a chargeback for a transaction placed with a Mastercard card may encounter reason code 4863, which indicates an improperly authorized transaction that the cardholder does not believe they should be responsible for paying. The actual underlying cause of this chargeback may be true fraud, friendly fraud, or merchant error. Merchants who believe they have received an invalid chargeback under reason code 4863 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Mastercard Chargeback Reason Code 4863?
Mastercard chargeback reason code 4863 falls under the “Fraud” category. The shorthand description is “Cardholder Does Not Recognize—Potential Fraud.” The use of this reason code indicates that the cardholder has claimed not to recognize a card-not-present transaction, and is disputing it because they believe it to be fraudulent.
What Scenarios Might Lead to This Chargeback?
Cardholders often discover that they’ve been victimized by true third-party fraud when they review their bank statement at the end of the month and see a charge that they don’t recognize or remember making. When they call their bank to dispute the charge and explain the circumstances under which they discovered it, the bank will assign this reason code to the chargeback.
This reason code is commonly seen in friendly fraud as well. Cardholders often forget about purchases they’ve made and dispute the charges out of genuine error. Merchant error can contribute to this problem as well, when merchant descriptors are used that do not match the name of the brand or storefront that the customer has interacted with.
“I don’t recognize this charge” is a simple, hard-to-falsify claim that does not require much in the way of explanation or corroborating detail. As such, it is also very common to see this underpinning deliberate friendly fraud claims.
What are the Important Timeframes?
Mastercard recommends that its cardholders file their dispute within 120 calendar days of placing the transaction. The acquirer and/or merchant have 45 calendar days to respond to this chargeback after it is filed.
How Can Merchants Fight this Chargeback Code?
Merchants can fight this chargeback if the transaction really was authorized by the cardholder, and they are either mistakenly or deceptively claiming otherwise. Your chargeback response should include the following:
- Documentation that proves that the cardholder knowingly authorized the transaction.
- Information that was not included in the authorization or clearing messages that helps to identify the transaction, such as a description of the goods or services, or an explanation of the relationship between the original transaction amount and a partial shipment of the goods purchased.
- Proof that the goods were shipped to the same address that was verified by AVS.
- Proof that you submitted SecureCode information with the authorization request, and the transaction was approved by the issuing bank.
- Evidence showing that the chargeback does not comply with Mastercard’s rules and is therefore invalid.
- If you have already processed a refund for the transaction in question, provide documentation that proves you have credited the cardholder’s account.
- If you have resolved the issue directly with the cardholder, provide proof, such as written correspondence, that proves they no longer wish to dispute the charge.
How Can Merchants Prevent this Chargeback Code?
This type of chargeback can come at you in three different ways—as true fraud, intentional friendly fraud, or unintentional friendly fraud—and different prevention methods apply for each of them.
This is a fairly common chargeback reason code, so developing the habits that can help you avoid it is an essential element in your overall strategy for chargeback defense.
The following best practices can help you avoid this kind of chargeback:
- Use tools like SecureCode, CVC2, and AVS.
- Use third-party anti-fraud tools.
- Make sure your merchant descriptor is easy for cardholders to recognize when they view their bank statements. Check to make sure it isn’t showing the name of an older business entity that does not match the name your customers know you by, and include a web URL and phone number if possible.
- During clearing, note internet, phone, and mail orders to differentiate card-present and card-not-present transactions.
About Mastercard Chargeback Reason Codes
Reason codes are alphanumeric codes that provide the justification for granting a chargeback. Pursuant to the Fair Credit Billing Act of 1974, cardholders have the right to dispute unauthorized or erroneous charges and issuing banks must reverse a disputed transaction of the cardholder’s claim is valid.
When a cardholder contacts their issuing bank to dispute a transaction and receive a chargeback, the dispute is assigned a reason code that most closely matches the substance of the cardholder’s claims. The reason code provides the merchant and other stakeholders in the dispute with a concise explanation for why a chargeback has been granted.
Each card network—Visa, Mastercard, American Express, and Discover—defines and maintains their own unique set of reason codes, which are applied to disputes by the banks that issue credit and debit cards under their brands.
Mastercard specifies 21 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, and Cardholder Disputes. Mastercard uses a four-digit numbering scheme for its chargeback reason codes.
Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. Identifying the chargeback reason code and the evidence required to fight it is the first step in chargeback representment, and analyzing your chargeback reason codes can provide you with insights into what types of disputes are causing you the most trouble. With this information, you can determine the root causes of your chargebacks and take action to prevent them from reoccurring.