Merchants who receive a chargeback for a transaction placed with a Visa card may encounter reason code 86, 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 either friendly fraud or merchant error. Merchants who believe they have received an invalid chargeback under reason code 86 may be able to represent the transaction and reverse the chargeback with the right compelling evidence.
What is Visa Chargeback Reason Code 86?
Visa chargeback reason code 86 falls under the “Point-of-Interaction Error” category. The shorthand description is “Paid by Other Means.” This reason code indicates that the cardholder is claiming that they paid for the disputed transaction by some other means—cash, check, a different payment card—and were therefore charged twice for a single purchase.
It’s not unusual for customers to initiate a transaction with a credit card, then change their mind and switch to a different form of payment. Sometimes they realize that they’ve pulled out the wrong card, or get better rewards on a different card, or may be nearing their limit.
If the merchant leaves the initial transaction open and does not back it out or cancel it, it’s possible to submit it erroneously, double-charging the customer for their purchase.
What Scenarios Might Lead to This Chargeback?
This type of chargeback sometimes happens because the merchant started a credit card transaction, and then the cardholder changed their mind about the payment method they wanted to use. If the merchant doesn’t cancel the transaction in progress, there is a risk that it may be finalized and submitted in a batch with other credit card transactions. In cases like this, the chargeback is clearly the result of merchant error.
Another merchant error scenario is why a customer keeps a card on file for automatic payments, but submits a one-time payment with a different card. If the merchant doesn’t catch it in time, the card on file may be processed automatically and create a duplicate payment for the same billing.
You may also see this chargeback used in instances of friendly fraud. Some cardholders will be under the impression that cash is untraceable, and that claiming that they changed their minds and provided cash for a purchase instead of the card that they initially offered is a foolproof way to get a chargeback and a “free” purchase.
As long as merchants keep careful and complete transaction records and write out timely receipts for cash purchases, there’s no reason these fraudsters should get away with it—the merchant should represent the charge, along with the compelling evidence from their transaction records, to get these chargebacks reversed.
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 cardholder’s claims are false. Your chargeback response should include the following:
- Proof that you did not receive any other form of payment for the goods or services purchased in the disputed transaction.
How Can Merchants Prevent this Chargeback Code?
Take care when processing transactions and be sure to completely void out in-progress transactions when the customer decides to make a significant change, like switching to a different payment method. You can also protect yourself in the event of later friendly fraud disputes by keeping detailed transaction records, such as legible receipt copies. Train your staff in the policies and procedures that can help prevent chargebacks like this from occurring.
The following tips can help you avoid this kind of chargeback:
- Double check all price calculations, transaction amounts, and payment types before finalizing a transaction.
- If a customer wants to change to a different form of payment after initially offering a payment card, be sure to void the card transaction immediately.
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.