Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 78, 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 is usually merchant error. Merchants who believe they have received an invalid chargeback under reason code 78 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 78?
Visa chargeback reason code 78 falls under the “Authorization” category. The shorthand description is “Service Code Violation.” This reason code means that the merchant processed a magnetic stripe transaction, without obtaining authorization approval, on a card that meets one of the following conditions:
- The card is a Visa Electron debit card.
- The card is in a registered positive authorization account rage (service code X2X).
- The card account owner is located in the Europe Region.
- The card’s service code specifies that the card is invalid for the transaction type.
- The card’s service code specifies that online authorization is required (excludes US Domestic cards).
A service code is a numeric value that indicates various attributes of a Visa card, such as whether it is a magnetic stripe card or an EMV chip card, and which regions it can be used in. Normally, if a merchant attempts to process a transaction that is not allowed per the card’s service code, the authorization response code will be a decline and will indicate that a service code conflict was detected.
When merchants ignore these messages or circumvent the authorization process, they risk incurring authorization-related chargebacks such as this one.
What Scenarios Might Lead to This Chargeback?
Cardholders who have Visa Electron cards, international cards, or any other card with special restrictions may find that their cards get declined when they to use them for certain transactions types. When this happens, the merchant involved may be tempted to run the card again or even bypass the authorization approval request in order to make the customer happy and avoid losing the sale. When they do so, they will automatically be held liable if a future dispute arises out of the transaction, and even if the cardholder does not dispute, Visa or the issuing bank may file a chargeback when they realize that a rule violation occurred.
What are the Important Timeframes?
For most disputes, Visa recommends 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 it is false or erroneous. Your chargeback response should include the following:
- Proof that the service code was valid for the transaction and authorization approval was received.
- Proof that card account was not for a Visa Electron card and was not in a registered positive authorization account range.
How Can Merchants Prevent this Chargeback Code?
Nearly all authorization-related chargebacks can be avoided by requesting authorization approval and discontinuing any transactions that do not receive an “Approved” response. Cardholders may not always understand why service code declines occur, and may assume that some technical glitch has occurred and that the merchant should simply run the card again—or skip the authorization step.
This is not the case, and merchants should always take service code declines seriously.
The following best practices can help you avoid this kind of chargeback:
- Always obtain authorization approval before processing any transaction.
- If a “decline” or ambiguous code is sent in response to an authorization request, ask the cardholder to furnish an alternate method of payment.
- Pay close attention to authorization response codes that are sent back to you and follow the guidelines specified by your acquirer or payment processor.
- Never “force” a transaction to go through without authorization, or after receiving a non-approval response.
- Train your staff on proper transaction handling procedures.
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.