In order to simply participate in challenging the chargeback, merchants must complete every stage of the process under increasingly tighter timeframes.
Our goal is to shed light on the chargeback process and help merchants understand the intricacies involved. After a merchant receives a chargeback notification and decides to contest it, they can initiate three dispute types or cycles:. All chargeback disputes begin when a cardholder files a dispute on a transaction with their issuing bank.
On average, a cardholder has between days to dispute a charge depending on the card association, and is sometimes able to dispute a year-old if special circumstances are considered such as natural disasters or family emergencies. The issuing bank then reviews the claim and determines its validity, which takes anywhere from two to six weeks. Visa gives issuing banks up to 30 days to review. The reimbursement exists as a temporary credit for the cardholder and can be later transferred back to the merchant should they win the chargeback dispute.
Below is an example of a standard chargeback notice that a merchant may receive. Each bank or processor may have a different format, but the details included will be the same. When the acquiring bank or payment processor notifies the merchant of the chargeback dispute, with their version of the above notice, they also pass along forms to the merchant to complete and return, in order to explain their side of the dispute.
Merchants are usually given a very tight deadline in which to respond to the request, on average around days. The merchant is also often asked for detailed evidence to prove that they did fulfill the order to the customer as described, including documentation like:. Once the acquiring bank passes the evidence to the issuing bank, the acquiring bank posts a temporary credit back in the merchant account for the chargeback amount. At this time, two temporary credits exist — one to the cardholder and one to the merchant.
When the chargeback dispute is resolved, one of these credits becomes permanent, and one reverses to a debit. The issuing bank then reviews the evidence submitted by the merchant to determine whether or not the merchant fulfilled the transaction as described, which takes between weeks, with Visa limiting the issuing bank to 30 days for review of the evidence.
An important note is that with Visa chargeback, merchants only have one shot one round of pre-arbitration to gather and submit their evidence to submit to the issuing bank before the issuing bank decides to side with the merchant or move to arbitration.
One of three things will occur:. Mastercard, Discover and American Express allow for a 2nd round of pre-arbitration while Visa limits pre-arbitration to one round. A second chargeback, also called pre-arbitration, occurs when, after a merchant disputes the first chargeback, the issuing bank pushes another chargeback on the same disputed transaction for any of the following reasons:. When the issuing bank notifies the acquiring bank of the second chargeback, and that information is passed to the merchant, the merchant is again given the opportunity to accept or contest.
Chargeback is not enshrined in law but is part of Scheme Rules, which participating banks subscribe to. Debit cards It applies to all debit cards goods, although exact rules may vary between the Visa, Maestro and American Express networks. Key Information. If you bought something with your card and things went wrong, you can make a claim. Chargeback can be used in cases of goods not arriving at all, goods that are damaged, goods that are different from the description, or where the merchant has ceased trading.
You can ask your card provider to try to claw back the money you paid, or part of it, using our template letter to make a chargeback claim. If, for example, you ordered two items but only one arrived, you can ask for the money back on the item you didn't receive.
But you can't claim back the cost of fixing a faulty item. Chargeback doesn't mean there is joint liability on the card company. Claims must be addressed to the bank that provides your debit or credit card, which in turn will put in a request to the merchant's bank. As a result, you could get your money back from the merchant's bank if the money is there to be recovered.
But, there are no guarantees your bank will be able to recover the money through chargeback, or that the trader will accept that you were justified in taking the money back. The trader could argue that you're in breach of contract for not paying. The main requirement for getting your money back through chargeback is evidence that there's been a breach of contract.
So, contact your bank as soon as you identify the problem because the clock may have already started ticking. There are some scenarios where the chargeback timeline is longer than the usual days or starts from a different date.
In other cases, customers may have over a year to file. An important exception is a request for information concerning a dispute. Merchants only have 18 days to respond to this. Like Mastercard, Visa mandates shorter timeframes for certain disputes. In some cases, for instance, claims must filed within 75 days of the transaction. The one exception is the timeframe for arbitration, which has the tightest deadline of all. If a party wants to escalate a dispute to arbitration, they must do so within 10 days.
American Express and Discover are different from Visa and Mastercard. These companies operate as issuing banks, while also managing their own proprietary card networks.
In contrast, Visa and Mastercard are both card networks who work with member banks to issue payment cards and deal with customers. American Express and Discover, on the other hand, do both: issue cards and process transactions from those cards.
What this means is that cardholders filing an American Express chargeback are also customers of the American Express issuing bank. That can make the overall process less complicated and more efficient, but in many ways it also constricts the merchant's ability to respond.
The company has since imposed a day limit for filing almost all chargebacks. The start date may vary in some circumstances, but those are the only exceptions. However, cardmembers are limited to two disputes per transaction.
They then have 20 days to respond to the inquiry, either accepting the dispute or offering evidence that the chargeback is invalid. In most instances, Amex will simply escalate the case straight to a chargeback. Discover typically allows cardholders to file a dispute up to days after the transaction.
However, individual banks and processors may be more strict with timelines. Appealing the representment decision must be done within 30 calendar days. If there is a second chargeback, the merchant has 30 days to submit additional documents. Merchants have 15 calendar days to request that the case progress to Discover arbitration. This detailed report shows why traditional attempts to combat chargebacks fail and how one fundamental misunderstanding is at the heart of most chargeback management mistakes.
Every chargeback is filed with a reason code that identifies the given reason for the dispute. These may impact the dispute time limits.
For example, some reason codes offer cardholders over a year to file. Others require banks to wait for a certain period before they can issue a chargeback.
This can be particularly relevant for merchants using an installment billing subscription business model. Not only can cardholders file a chargeback months beyond the actual transaction date, they may also be allowed to dispute back payments for several months—or even years—of the term of the subscription. Like other parts of the process, learning all the types and exceptions of chargeback time limits will take a lot of effort…and money.
Understanding chargeback time limits is a critical part of recovering revenue, though. Most merchants find it hard to try and handle chargebacks in-house. One issuer may closely follow card scheme guidelines, while another may enact their own, stricter rules. Disputes can blindside a merchant months after the transaction was settled. For merchants, it can seem like a no-win situation. Contesting chargebacks takes a lot of time and resources, with no guarantee of success.
At the same time, not fighting illegitimate chargebacks is essentially throwing away revenue. This balancing act often leaves merchants feeling helpless. Outsourcing the task of chargeback representment ensures a much higher win rate.
Contact us today to learn more about ensuring representment success amid restrictive chargeback time limits. Chargeback time limits refer to the deadlines merchants, banks, and cardholders have when filing different phases of the chargeback process.
Also called credit card dispute time limits, they vary from one card brand to another, but are often set at days following a purchase.
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