Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 13.8, which indicates a disputed transaction that the cardholder does not believe they should be responsible for receiving. The actual underlying cause of this chargeback is usually merchant error. Merchants who believe they have received an invalid chargeback under reason code 13.8 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 13.8?
Visa chargeback reason code 13.8 falls under the “Consumer Disputes” category. The shorthand description is “Original Credit Transaction Not Accepted.” This reason code indicates that the cardholder did not accept an Original Credit Transaction from the merchant, or that receiving Original Credit Transactions is prohibited by law in the region where the issuing bank is located.
An Original Credit Transaction is a method of direct, real-time payment backed by Visa and Mastercard to allow for an immediate transfer of funds into a cardholder’s account. Original Credit Transactions can be performed faster and more easily than regular credit transactions, which must be processed like any other card transaction. An Original Credit Transaction does not require the same payment credentials or authorization process. Because of their speed, affordability, and convenience, many companies find Original Credit Transactions to be their preferred way to deliver funds to their customers and vendors. However, Original Credit Transactions are not permitted in all localities.
This means that Visa reason code 13.8 functions as a reverse chargeback—it returns money to the merchant’s account that the merchant had intended to go to a cardholder. Unfortunately, it still counts as a chargeback, and may affect your chargeback ratio and cause you to incur chargeback fees.
What Scenarios Might Lead to This Chargeback?
The usual set up for this chargeback is that the merchant has identified a cardholder who is entitled to a refund or credit for some reason—a customer, or perhaps a third-party vendor or independent contractor. The merchant decides to provide funds to this individual by processing an Original Credit Transaction, but they do not check with the recipient first about the acceptability of such transactions.
When the Original Credit Transaction is sent, it is refused by the recipient’s issuing bank because Original Credit Transactions are not permitted by the laws in their country. The issuing bank files a chargeback, reversing the Original Credit Transaction and sending the funds back to the merchant’s account.
The merchant now has another chargeback on their record, and they still owe that individual the same amount of funds.
What are the Important Timeframes?
For this dispute, Visa requires that its cardholders file their claim within 120 calendar days of placing the transaction. The acquirer and/or merchant have 20 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 basis for the chargeback is false or erroneous. Your chargeback response should include the following:
- If the Original Credit Transaction was reversed and should not have been subject to a chargeback, provide documentation proving that a transaction reversal was processed.
- 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?
You can easily stay clear of this chargeback reason code by verifying beforehand whether or not you will be able to send an Original Credit Transaction to a particular recipient. While these transactions may be cheap and convenient for merchants, they can only cause delays and frustration if you end them to someone who is unwilling or unable to receive them.
The following advice can help you avoid this kind of chargeback:
- Maintain accurate transaction records.
- Inquire with cardholders about whether they can or will accept an Original Credit Transaction before processing one.
- Familiarize yourself with the laws pertaining to Original Credit Transactions in the regions in which you conduct business.
About Visa 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.
Visa specifies 46 reason codes under the categories of Fraud, Authorization, Point-of-Interaction Error, Consumer Disputes, and Processing Errors. Visa uses a numeric 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.