Chargeback Management: A Merchant's Guide
Chargeback management means knowing the dispute life cycle, each card network's rules, and the habits that keep dispute ratios low. Here is what Visa, Mastercard and American Express say.
A chargeback is a sale reversed by the cardholder's bank. Chargeback management is the work of stopping that from happening, and of answering well when it does. This page walks through the dispute life cycle, the rules each card network sets, and the habits that keep the numbers down. It leans on what Visa, Mastercard and American Express say, not on what any vendor claims.
What chargeback management means
A dispute moves through stages. The cardholder questions the charge. The issuer files the chargeback. Then it is your turn.
In Visa's dispute life cycle, the merchant accepts or rejects the dispute, and a rejection needs supporting documents. Visa says a merchant may also settle a dispute by giving its acquirer more details about the sale. So you have three moves: accept it, fight it with proof, or settle it early.
Visa says the merchant's time to respond is the time on the acquirer's request, and it may vary by acquirer. That makes the acquirer your clock. Read the request the day it arrives.
There is a cost to every path. Visa says a merchant can lose the sale amount and the goods, and also pay its own costs to respond. And Visa says a merchant who cannot fix a dispute takes the loss. That is why the work of chargeback operations starts long before a claim lands.
How each card network runs its process
The three big networks do not run disputes the same way. Knowing which one governs your sale changes how you answer.
Visa
Visa's process gives the merchant a clear choice at each step. Accept the dispute, or reject it with documents. If the case keeps going, Visa's rules say an acquirer may send Compelling Evidence with a pre-arbitration attempt.
Visa defines Compelling Evidence as proof from a merchant or acquirer that the cardholder took part in or benefited from the sale. That is what Compelling Evidence has to show. It ties this cardholder to the sale.
Arbitration is the last stop, and it has a hard rule. Visa's rules bar a side from giving Visa anything at arbitration that it never sent to the other side. So send your best proof early. Proof never sent to the other side cannot go to Visa at arbitration. When deciding, Visa looks at whether time limits were met and documents were supplied, readable and translated. For a deeper look at this track, see the visa chargeback guide.
Mastercard
Mastercard sets its own clocks. Mastercard generally gives the acquirer 45 calendar days from the chargeback to send a second presentment. Mastercard makes the issuer wait at least eight calendar days for promised second presentment documents before filing pre-arbitration.
At pre-arbitration, the acquirer has a choice. Mastercard lets an acquirer accept a pre-arbitration case, which makes it responsible for the disputed transaction. Mastercard also lets the acquirer reject a pre-arbitration case when the merchant has a rebuttal to the issuer's new documents.
American Express
A merchant can answer American Express disputes online and upload supporting documents from a computer. An American Express online account shows each dispute's details, deadlines and response options in one place.
The deadline rule is strict. If a merchant does not reply to American Express in time or with the requested documents, its account is debited. To avoid a No reply or Insufficient reply Chargeback, a merchant should answer an Inquiry within 20 days.
Why dispute ratios matter
Networks watch the share of your sales that end in disputes.
Visa's program is VAMP. The VAMP ratio adds the count of fraud and disputes, then divides by the count of settled transactions. Both fraud and disputes count toward it.
Mastercard designed the Excessive Chargeback Program so each acquirer closely watches chargebacks at the merchant level. A merchant can be an Excessive Chargeback Merchant, or at a higher level, a High Excessive Chargeback Merchant.
Then there is the MATCH Pro system. Excessive Chargebacks is one of the reasons a merchant can be listed in the MATCH Pro system.
There is one escape hatch worth knowing. When a merchant gives the required information through the pre-dispute option, the dispute is rejected and does not add to dispute ratios. Answering early, in the right channel, keeps the score clean.
Preventing disputes at the source
Many disputes come from avoidable mistakes in how a merchant processes a sale. Fixing those can stop some claims at the start. This is the core of any prevent chargeback plan.
Start with the name on the bill. Cardholders must be able to recognize your charges when they look at their bank statements. If the merchant name on the statement is hard to recognize, the cardholder may think a valid charge is fraud. If your legal name on statements is nothing like your shop name, that is your first fix.
Make your policies visible. Your website must show its refund policy before final checkout, with a click to accept button or checkbox. A customer who never saw the policy will not feel bound by it.
Watch your timing on shipped goods. For online and phone sales, do not deposit the sale until you have shipped the goods. Depositing early invites a claim from a buyer whose order has not arrived.
Charges that renew on a schedule call for closer attention. If a customer ends a recurring charge, stop billing immediately or in the way the customer requests. Recurring charges are especially likely to draw disputes, so train sales and customer service staff to handle them.
And always get an authorization for mail order, phone, internet and recurring sales, whatever the amount.
Responding with the right evidence
When a dispute does land, the right proof depends on the claim type.
For a customer who says the goods never came, proof of delivery or pickup lets you answer the dispute. Keep the tracking record with the order.
For fraud claims, Visa's guidelines list the purchaser's name and email address linked to the customer profile as allowable compelling evidence. Visa's guidelines say a signed order form is allowable evidence for a mail or phone order transaction. Visa's guidelines say evidence that a ticket or boarding pass was scanned at the gate is allowable for a passenger transport transaction. Match your proof to the claim, and to the network's own list.
Some merchants add tools on top of this work. If you are weighing that, read up on chargeback protection and what each option actually covers.
Tracking and root-cause analysis
You cannot fix what you do not count. Visa suggests merchants track dispute activity as a share of sales activity. A merchant that sells both in person and online should track those disputes separately, since the causes differ.
Track your disputes by type, since each type points to its own business problem and fix. A pile of fraud claims says one thing. A pile of "goods not received" claims says another. The type is the clue.
Your acquirer should be part of that work too. Work with your acquirer on a plan that finds the root cause of your disputes and how to fix it.
Where to start
Pick the habit you are weakest on. If your billing name is confusing, fix that first. If you deposit before shipping, stop. If you have no count of disputes by type, start counting this month. Chargeback management is not one big project. It is a set of small habits, each one backed by a network rule, done every time.