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FAQ: Chargebacks

A chargeback is the reversal of a sale transaction that arises from a processing technicality, a customer dispute or fraudulent activity. All chargebacks are violations of the rules and regulations established by a payment brand, such as Visa® or MasterCard®.

Chargebacks are something every merchant wants to avoid, as they can result in lost revenue.

Here are some of the most common reasons why chargebacks happen. Your customer:

  • Did not receive a product or service
  • Does not recognize the charge or payee on his or her credit card statement
  • Believes the product or service was defective, damaged or not as it was described
  • Was a victim of fraud – his or her credit card was stolen or used without consent

Once a customer realizes there is a problem with his or her transaction:

  1. Your customer contacts their issuer (the bank that stands behind the card), explains the problem and asks for their money back.
  2. The issuer researches the accuracy of the claim. If it is considered unreasonable, then the customer is responsible for the payment and your settlement funds are not impacted.
  3. If your customer appears to have a reasonable claim, the issuer will make a temporary credit payment to your customer and begin the chargeback process.
  4. During the chargeback process, the card issuer will obtain funds from the respective payment brand, who in turn debits the funds from Chase Paymentech. Chase Paymentech, in turn, will debit the funds from your settlement account.
  5. Chase Paymentech then sends you documentation that notifies you about this chargeback, or opens a case in the free Online Chargeback Management System, if your business subscribes.

Chase Paymentech carefully reviews all chargebacks to ensure their validity. If you get a chargeback, and you do not subscribe to the free Online Chargeback Management System, you should receive a Chargeback Document from us via fax or the U.S. Post Office.

This document informs you that a debit has been made to your business checking account and gives you the option of accepting or contesting the adjustment. If contesting the adjustment, you will be required to respond by providing all specified information requested on the Chargeback Response form.

Note: The debit (removal of funds from merchant account) occurs upon receipt of the chargeback, but this document does not generate until the chargeback has a status of "return to merchant (RTM)."

When Chase Paymentech receives a chargeback from the issuing bank, we first look at our own records to try to resolve the chargeback automatically. If we do not have the necessary information, the chargeback will receive a status of "Return to Merchant" and we will send you a Chargeback Document if you manage your chargebacks manually. If you subscribe to Chase Paymentech's free Online Chargeback Management System, the process can be managed electronically, saving you time and money.

Complete the Chargeback Document with as much information as you have available, and return it to Chase Paymentech's Chargeback Department using the fax number or physical address on the form.

If you fill out and submit this documentation, the analyst will review your rebuttal to ensure compliance with the payment brand rules and regulations. If your response is consistent with the rules and regulations, then the chargeback is represented for review by the payment brands, and the chargeback funds may be returned to your account.

If you do not fill out and submit this documentation, then the chargeback automatically moves forward unchallenged and the chargeback funds will not be returned to you.

Chargebacks can cost time and money – while some chargebacks cannot be prevented, many can with comprehensive employee training.

The best way to prevent chargebacks is to establish best practices at the time of sale that are followed consistently by all employees. Here are some tips:

  • Never alter a sales draft.
  • Always obtain an authorization for the exact amount of the transaction processed to the card.
  • If authorization is declined for the full amount of the sale, don't try to get an authorization by "splitting" or lowering the amount of the transaction.
  • If you can't get a single authorization for the full amount of the sale, then decline the credit card transaction and request another form of payment.
  • Whenever a card does not successfully swipe and you have to key in a transaction, manually imprint the card and ensure the signature and all transaction information is transferred to the imprinted draft. Make sure the manual draft is imprinted with the merchant name and location, or submit the card verification data (CVD) code with the authorization (3-digit code on back of credit card).
  • When a customer is due a credit and the original sale was made on a credit card, process the credit back to the original card number instead of refunding by check or cash. If a credit is due on more than one sale, then process each credit individually.
  • If the sale is being conducted in-person, make sure your return policy is pre-printed on the credit card sales draft and signed by the cardholder at the time of the original sale. The refund policy must be close to the cardholder's signature to be recognized by the payment brands.
  • If the card is present at the time of sale, always compare the cardholder's signature to the signature on the back of the card. If the signature panel is blank, then ask the cardholder to sign it. If the cardholder refuses, then you should request another form of payment.
  • Respond to all retrieval requests with valid, legible documentation.
  • If the card is present at the time of sale, be sure to compare the credit card account number on an electronically printed draft to the credit card number embossed on the credit card. If the numbers don't match, call your Automated Voice Authorization Center and tell the operator that you have a "Code 10" authorization and that the card numbers do not match.
  • For ecommerce sites, it's recommended that all transactions be reviewed for address verification results and that CID be required.

Each chargeback and retrieval request bears a reason code, established by the payment brands. This value reflects why the request or dispute was initiated. The reason code is accompanied by its description on your chargeback documentation.

For card-not-present transaction types, Chase Paymentech auto-responds to Visa and MasterCard retrievals on the merchant's behalf. If you're using the free Online Chargeback Management System, you can electronically view and respond to retrievals, which are the issuer's requests for additional information about a transaction, usually on behalf of the cardholder. Issuers have the right to initiate a chargeback if the response to a retrieval requests is not timely, legible or valid. So it's in your best interest to respond to a retrieval request promptly and with as much detail as possible.

Merchants who process their chargebacks manually may receive a paper Retrieval Request Notification or a Retrieval Activity Report from Chase Paymentech for card-present or all Discover transactions. If you receive one, you'll want to review it carefully and provide the sales receipt before the due date to prevent the initiation of a chargeback.

Retrieval requests are system-generated. The first notification is sent to you at the very beginning of the process. The second notification follows on the seventh day and the third on the fourteenth day. Even though you may have already responded, the notification will be generated until the retrieval has been reviewed by a Chase Paymentech chargeback analyst. The analysts work diligently to review the response, but it may take a few days due to the volume.

If you subscribe to Chase Paymentech's free Online Chargeback Management System, you should receive only the one notification, due to the tool's operational efficiencies.

Once we receive your faxed chargeback or retrieval response documentation, it is assigned to the queue of a chargeback analyst. They review each fax in the order received and it can sometimes take a day or more, depending on case volume.

If you subscribe to Chase Paymentech's free Online Chargeback Management System, you can check on the case status and review submitted documents online 24/7.

When a cardholder disputes a transaction, the issuing bank credits the cardholder, the payment brands credit the issuer, Chase Paymentech credits the payment brands and that same amount is debited from your merchant account. Learn more about preventing chargebacks.

Chargeback funds are processed immediately upon receipt of a chargeback. Chargeback documentation is then generated upon disposition of the chargeback, which could follow several days later. If you suspect you're not receiving the appropriate forms, you should verify your mailing address or fax number with Merchant Services to ensure we have up-to-date and accurate contact information.

Chargebacks can cost you time and money – subscribe to the free Online Chargeback Management System to guarantee that you have quicker access to your chargeback and retrieval details.

Time frames for chargeback resolution are established by the payment brands. For Discover, MasterCard and Visa transactions, the acquirer has 45 days to respond to the chargeback. We set the merchant's "Due Date" at 39 days to allow adequate time for review by an analyst. To meet these aggressive time frames, we recommend using the free Online Chargeback Management System to ensure you don't miss a deadline.

  • To request access to the free Online Chargeback Management System through your Chase Paymentech reporting application, please contact Merchant Services at 1.888.886.8869.
  • To ensure the security of your sensitive data, account verification and contact authentication will be required.

If you have a question about fees or need general support for your existing processing account, you can call Chase Paymentech Merchant Services at 1.888.886.8869.