Chargeback Codes and Management Guide

Identifying and Preventing Chargebacks

What is a Chargeback?

A chargeback occurs when a customer contacts a credit card Issuing Bank to initiate a refund for a purchase they made on their credit card. The reasons why chargebacks arise can vary greatly but generally, they are the result of a customer being dissatisfied with their purchase, a customer not having authorized the transaction or a customer reporting a fraudulent transaction. An unauthorized transaction could be a result of a duplicate processing, misunderstanding of the price, deposit, return or refund policies between the customer and the merchant.

Merchant Responsibilities

The customer may or may not have contacted the merchant about remedying this situation ahead of time. They may even be completely wrong. However, responsibility falls on the seller to ensure that the transaction goes smoothly and the customer is satisfied. A failure somewhere within the fulfillment process, including at the customer service level, can lead to a chargeback.

Preventing Chargebacks

The best way to deal with any chargeback is to prevent it from happening in the first place. The following suggestions are very generic and can be used by most businesses to decrease their chargeback potential.

Chargeback Process

  1. The customer disputes a transaction by contacting their card Issuing Bank.
  2. The card Issuing Bank researches to determine whether the reasoning for the chargeback is valid. If not, the chargeback is declined and the customer is held responsible for the charge.
  3. A provisional credit is provided to the customer. The card Issuing Bank initiates a chargeback process and obtains credit from the merchant's Processing Bank.
  4. The merchant's Processing Bank researches the validity of the chargeback. If they determine the chargeback is invalid, they will decline the chargeback and return it to the card Issuing Bank.
  5. The chargeback amount is removed from the merchant's account and the merchant's Processing Bank provides written notification to the merchant.
  6. Did a processing error occur? If so, the sale is re-presented to the card Issuing Bank for corrections.
  7. The merchant provides documentation to remedy the chargeback. If the provided documentation is found to be satisfactory, the chargeback is declined and the customer is once again charged for the sale. If the documentation is found to be unsatisfactory, the chargeback is successful and the process ends.
There are multiple steps involving multiple parties and each step requires the responsible party to dedicate a certain amount of time to its management. The resolution of a typical chargeback can take anywhere from six weeks to six months.

Chargeback Reason Codes

Common chargebacks in a card-not-present environment (some of these reasons may be exclusive to POS or MO/TO merchants).

1. Fraud – Card Present Environment

Merchant completes a transaction without the cardholder's permission, or a fictitious account number is used and the transaction receipt bears no valid account number.

Codes

Visa
81
Fraud - Card Present Transaction
MasterCard
4837
No Cardholder Authorization
Discover
UA01
Fraud – Card Present Transaction

Note

Card imprint requirements only apply if the terminal is not chip-enabled. If a chip card was manually keyed at a chip-enabled terminal, the transaction is considered a fallback and, if authorized by issuer, is not eligible for chargeback.

Tips

2. Cancelled recurring transaction

Merchant continues to charge a cardholder's account for recurring transaction after receiving a notice of cancellation.

Codes

Visa
41
Cancelled Recurring Transaction
MasterCard
4841
Cancelled Recurring Transaction
Discover
AP
Recurring Payments

Note

for merchants with variable recurring transaction amounts. When you set up the customer's recurring billing, you should have disclosed that this charge would be for a variable amount and permitted the cardholder to set a range of approved charges. If a charge exceeded this amount and you did not notify the cardholder in advance, they are able to successfully dispute the charge using the above reason code. If the customer disputed the charge using that reason code, we recommend you contact the cardholder directly to obtain payment and determine if this recurring service should be cancelled.

Tips

3. Service not provided or merchandise not received

Cardholder acknowledges participating in the transaction and claims one of the following occurred:

Codes

Visa
30
Services Not Provided or Merchandise Not Received
MasterCard
4855
Goods or Services Not Provided
Discover
RG
Non-Receipt of Goods or Services

Tips

4. Defective Merchandise

Cardholder claims that the good received were defective or not as described by merchant.

Codes

Visa
53
Not As Described or Defective Merchandise
MasterCard
4853
Cardholder Dispute-Defective/Not as Described
Discover
RM
Cardholder Disputes Quality of Goods or Services

Tip

5. Duplicate processing

A single transaction was presented two or more times to the issuer for the same cardholder account number, similar transaction amounts and similar clearing data. If the same transaction was processed by different acquirers, the issuer is required to dispute the transaction that posted last.

Codes

Visa
82
Duplicate Processing
MasterCard
4834
Duplicate Processing
Discover
DP
Duplicate Processing

Tips

6. Fraudulent multiple transactions

The issuer receives a written complaint from its cardholder who acknowledges participation in at least one transaction at the same merchant location where the other transaction(s) allegedly involving the cardholder took place, but states that:

Codes

Visa
57 - Fraudulent Multiple Transactions
62 - Counterfeit Transaction
83 - Fraud - Card Absent Transaction
93 - Merchant Fraud Performance Program
MasterCard
4837 - No Cardholder Authorization
4840 - Fraudulent Processing of Transactions
4849 - Questionable Merchant Activity
4870 - Chip Liability Shift
4871 - Chip/PIN Liability Shift
Discover
UA02 - Fraud – Card Not Present Transaction

Tip

7. No authorization

Transaction exceeds the floor limit and an authorization was not obtained on the transaction, or transaction is an online check card transaction or an original adjustment.

Codes

Visa
70 - Card Recovery Bulletin or Exception File
71 - Declined Authorization
72 - No Authorization
73 - Expired Card
78 - Service Code Violation
MasterCard
4807 - Account Closed and No Authorization Obtained
4808 - Requested/Required Authorization Not Obtained
4812 - Account Number Not on file
Discover
AT - Authorization Non Compliance

Tip

8. Incorrect transaction amount or account number

Used under any of the following circumstances:

Codes

Visa
80
Incorrect Transaction Amount or Account Number
MasterCard
4831
Transaction Amount Differs
Discover
AW
Altered Amount

Tip

9. Fraudulent transaction - Card-not-present environment

A transaction was processed in a card-not-present environment without the cardholder's permission or with a fictitious account number.

Codes

Visa
83
Fraud - Card Absent Transaction
MasterCard
4837
No Cardholder Authorization
Discover
AUA02W
Fraud – Card Not Present Transaction

Tips

10. Credit not processed

The merchant issued a credit transaction receipt or refund acknowledgement but the transaction was not processed through interchange. The cardholder returned merchandise or cancelled a sale but did not receive a credit receipt or refund acknowledgement.

Codes

Visa
85
Credit Not Processed
MasterCard
4860
Credit Not Processed
Discover
RN2
Credit Not Processed

Tip