Understanding Credit Card Chargeback Reason Codes

Understanding Credit Card Chargeback Reason Codes

No ecommerce business wants to get hit with a chargeback, but almost every business is likely to experience them at some point. These refund requests can have serious repercussions on a company’s bottom line, reputation and ability to process credit card transactions.

Chargebacks have grown into a huge problem for retailers, costing the ecommerce industry about $125 billion. For every $100 in chargebacks, it actually costs a company $240. That’s due, in part, to the work businesses must do to dispute them.

Quote-Headshots-ChrisBallenger

“Chargeback management typically falls on team members who have other jobs, which means they have to stop doing what drives the business to research transaction details, determine the correct process with the payment processor, and continue to monitor the process through disposition. That’s why many companies feel they need a full-time resource just to handle chargebacks.”

Chris Ballenger, CEO of ChargebackOps, a ClearSale Company

For enterprise and midsize ecommerce businesses, the allocation of a part-time resource might be possible. But small businesses already have a skeleton crew. Someone has to stop doing their day-to-day job to handle chargebacks.

It’s not surprising at all. Rampant fraud has forced companies to take a defensive stance against chargebacks.

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Disputing Chargebacks Is No Simple Task

Not only is it time-consuming to fight a chargeback, but it can also be downright complicated. If you’re pulling resources from other teams, they’ll already be working from a disadvantage.

To win a chargeback dispute, you need expertise in several areas.

 

How The Chargeback Process Works

Back in the days when payment methods were limited to credit cards and PayPal, the process was fairly consistent. Granted, you have to pay attention to timeframes. The time window for Visa is different than PayPal, but both publish their processes to make it a bit easier to follow.

With the introduction of alternative payment options, such as Klarna, Venmo and niche buy now, pay later solutions, the process isn’t so easy to follow.

Quote-Headshots-AlanHubbs

“Many niche payment solutions use software that isn’t as well-tested as established card networks. There’s often no infrastructure for fighting a dispute or system that will tell you the status of a chargeback. In some cases, businesses are notified of a customer claim against a charge and are given an almost impossible timeline before the chargeback can no longer be disputed. It’s quite challenging.”

Alan Hubbs, COO of ChargebackOps, a ClearSale Company

 

It’s also critical to know which transaction data will help make your case against a chargeback.

 

Which data is required to win a dispute?

Central to making a case against a chargeback is having the right documentation – evidence that the customer actually made the purchase. This can include business records, such as sales receipts, order forms and tracking numbers. Depending on the industry and type of product or service, you may need additional data, like:

  • Correspondence between the customer and the merchant’s customer service department
  • AVS and CVV match from the customer’s credit card
  • Geolocation
  • Saved email invoices
  • Saved transcripts/screenshots of all customer service communications
  • Proof the customer logged in, downloaded, viewed and used a digital order (using IP address)
  • Evidence the customer accepted the merchant’s service, return and refund policies
  • Documentation showing the customer was notified about any upcoming recurring purchases
  • Screenshots of a customer’s public social media account that shows the disputed goods being used

You also need to know deadlines.

 

How much time do you have to dispute a chargeback?

We mentioned earlier that the timeframes for various payment methods vary when it comes to chargebacks. In the United States, customers have as long as four months to raise the red flag about a charge on their statement. In countries like the United KingdomAsia and Europe, customers have even more time.

But ecommerce businesses have considerably less time to respond:

  • Visa gives businesses 30 days
  • PayPal has a 10-day window for businesses 
  • MasterCard allows for 45 days
  • American Express gives businesses only 20 days
  • Discover has a window of 20 days

Equally important is the need to understand why a chargeback has been initiated, which means you have to have at least a cursory knowledge of chargeback reason codes.

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Understanding Chargeback Reason Codes

Although each card network has its own chargeback reason codes, their end goal is the same: Clearly describe why a customer is disputing a transaction. And when companies recognize this, they’re better able to identify trends and areas of weakness, evaluate the legitimacy of chargeback claims, prevent future chargebacks, and improve customer satisfaction.

Here’s a list of the most common chargeback reason codes by processor.

 

Visa Chargeback Codes

Visa uses four main categories — authorization, consumer disputes, fraud and processing errors — to organize its chargeback reason codes.

Authorization

Chargeback Reason

Code

Description

Declined Authorization

11.2

The cardholder claimed they declined authorization of the card-not-present transaction.

No Authorization

11.3

The business didn’t obtain a valid authorization.

 

Consumer Disputes

Chargeback Reason

Code

Description

Services Not Provided or Merchandise Not Received

13.1

A cardholder tells the card issuer they didn’t receive an order on time or at all.

Canceled Recurring Transaction

13.2

A customer asked a business to cancel a recurring transaction but the business failed to do so.

Not as Described/Defective Merchandise

13.3

13.4

13.5

A customer believed the product or service didn’t match the description or reported the product as damaged.

Original Credit Transaction Not Accepted

13.8

The cardholder didn’t recognize the transaction based on the information provided on their statement.

 

Fraud

Chargeback Reason

Code

Description

EMV Liability Shift Counterfeit Transaction Fraud

10.1

The cardholder claimed they didn’t authorize or participate in the transaction.

 

Processing Errors

Chargeback Reason

Code

Description

Incorrect Amount

12.5

The cardholder claimed the amount charged is not correct.

Duplicate Processing

12.6

The cardholder did make one purchase but the charge was duplicated without authorization.

 

 

Mastercard Chargeback Codes

Mastercard released its revamped chargeback reason codes in 2016, grouping them into four major categories: Authorization, cardholder disputes, fraud and point-of-interaction errors.

Authorization

Chargeback Reason

Code

Description

Authorization-Related Chargeback

4808

The authorization code for the transaction at the time of the original sale couldn’t be verified.

 

Cardholder Disputes

Chargeback Reason

Code

Description

Installment Billing Dispute

4850

The cardholder contested the installment billing charges.

Cardholder Dispute

4853

4855

The cardholder reported that the goods or services received were not as described.

 

Fraud

Chargeback Reason

Code

Description

No Cardholder Authorization

4837

Cardholders reported they didn’t initiate a transaction.

Fraudulent Processing of Transactions

4840

A cardholder had control of their card and made a legitimate transaction and subsequent (disputed) transactions were made within 15 minutes.

Questionable Business Activity

4849

A business violated the terms of the Questionable Business Audit Program or threatened the cardholder if they refused to complete the transaction.

Cardholder Does Not Recognize – Potential Fraud

4863

The cardholder didn’t recognize the non-face-to-face transaction on their statement.

Chip Liability Shift

Chip/Pin Liability Shift

4870

4871

The cardholder claimed to not have participated in or authorized a transaction. For counterfeit transactions, liability remained with the party that didn’t invest in chip technology.

 

Point-of-Interaction Errors

Chargeback Reason

Code

Description

Transaction Amount Differs

4831

The cardholder claims the amount they agreed to pay differs from the amount charged.

 

 

American Express Chargeback Codes

American Express uses four main categories — authorization, processing errors, fraud and card member disputes — to classify their chargeback reason codes.

Authorization

Chargeback Reason

Code

Description

Charge Amount Exceeds Authorization Amount

A01

The charged amount was greater than the amount of the authorization approval.

No Valid Authorization

A02

There was no valid authorization approval for the charge the business submitted.

Authorization Approval Expired

A08

The authorization approval expired before the charge was submitted.

 

Processing Errors

Chargeback Reason

Code

Description

Incorrect Charge Amount

P05

The transaction amount the business submitted was different from the amount agreed to by the cardholder.

Late Submission

P07

The business didn’t submit the charge within the established timeframe.

Duplicate Charge

P08

A charge for a transaction was submitted more than once.

 

Fraud

Chargeback Reason

Code

Description

No Card Member Authorization

F24

The cardholder denied the charge, and the business couldn’t prove otherwise.

Card Not Present

F29

The cardholder denied they placed an order online, by mail or over the phone.

 

Card Member Dispute

Chargeback Reason

Code

Description

Goods/Services Not Received or Only Partially Received

C08

The cardholder claimed they didn’t receive the goods or services or only partially received the order.

Canceled Recurring Billing

C28

The cardholder reported they canceled or attempted to cancel a recurring subscription for goods or services.

Goods/Services Not As Described

C31

The cardholder claimed the goods or services received are materially different from the description provided at the time of the transaction.

Goods/Services Not As Described

C32

The cardholder claimed the goods or services received are damaged or defective.

 

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How ClearSale Helps Companies Reduce & Dispute Chargebacks

Chargebacks may be chalked up to the cost of doing business for some companies, but the costs and risks of a dangerously high chargeback rate can mark the end of some ecommerce businesses – especially for small businesses.

You need a partner with options to meet your company’s specific needs. At ClearSale, we offer clients three options.

ClearSale Total Protection

For large businesses whose fraud teams have a good understanding of risk profile and goals, our Total Protection approach allows you to recoup a portion of any losses due to fraudulent transactions.

We’ll establish a Service Level Agreement (SLA) that specifies KPI thresholds related to fraud and chargebacks. And we’ll reconcile to those KPIs every quarter. If they aren’t met, you’ll receive a discounted invoice.

Companies that choose this approach aren’t directly reimbursed for chargebacks that may occur; however, they do benefit from our hybrid fraud prevention model that combines AI-enabled automatic approvals and secondary review by the world’s biggest and most experienced team of fraud experts.

ClearSale Total Guaranteed Protection

High-risk ecommerce businesses may choose our 100% guaranteed coverage approach to handling fraud-related chargebacks. This “Chargeback Insurance” guarantees that any approved transaction that turns out to be fraudulent and results in a chargeback will be reimbursed to you.

End-to-End Chargeback Management

Regardless of size, your ecommerce business may benefit most from comprehensive chargeback management that includes a chargeback reversal approach designed to recover financial losses. 

With our acquisition of chargeback management provider ChargebackOps, we can offer companies chargeback mitigation and resolution services including:

  • Training fraud analyst teams. 
  • Conducting data audits and gathering compelling evidence.
  • Drafting timely responses to banks and card issuers. 

Where it makes sense, this approach also offers companies operational insights that can help improve internal processes that may be contributing to fraud risk and subsequent chargebacks.

By choosing a customized chargeback management approach, ecommerce businesses can also breathe a little easier knowing they’re protected against the increase in fraud attempts and poised for long-term financial success. Contact ClearSale today to learn more about our chargeback services.

 

ClearSale Offers End-to-End Chargeback Services With ChargebackOps Acquisition

 

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