A Merchant Dispute: What Happens and What to Do
A cardholder disputes a charge, and the claim lands on your shop. Here is Visa's own account of how a dispute reaches a merchant, the choice to accept or fight, and what to send.
A customer calls their bank. A few days later, a notice lands in your shop's inbox. That notice is a merchant dispute, and this page is about what you do next. Everything here comes from Visa's own rules and its guide for merchants. If you want the buyer's side of the same event, read what happens to the merchant when you dispute a charge after this one.
What a merchant dispute is
A dispute is not the same as a complaint. A complaint is an email from a customer who wants a refund. You can answer it, fix it, and the matter ends between the two of you.
A dispute is a claim that has already gone past you. The cardholder has asked their bank to pull the money back, and the bank has opened a case. For the plain meaning of the word, see our page on the dispute transaction definition.
Visa says a merchant who cannot fix a dispute takes the loss. That is the whole game in one sentence. Your job is either to fix it or to prove the sale was sound.
How a dispute starts and reaches you
The cardholder starts it by contacting their bank.
In Visa's dispute life cycle, the merchant accepts or rejects the dispute, and a rejection needs supporting documents. So the notice you get is really a question. Do you give in, or do you stand behind the sale?
Visa says a merchant may settle a dispute by giving its acquirer more details about the sale. Sometimes the fix is that simple.
Your two options: accept or reject
Accepting means you agree the money should stay with the cardholder. Rejecting means you fight, and you send proof that the sale was sound.
Which one is right depends on the case. Visa says accepting a dispute that cannot be fixed may save the time and cost of fighting it. If you never shipped the goods, accepting may save you the work.
If the sale was real and the customer got what they paid for, rejecting is the move. But a rejection with no proof behind it is just a claim against a claim. Visa's life cycle says the rejection needs supporting documents. Gather them before you say no.
What evidence to send
Visa's guidelines list the kinds of documents a merchant can send. Here is what they cover.
Proof the customer got the goods or the service. Visa's guidelines say merchants can respond with documentation proving the cardholder or authorized person received the merchandise or services as agreed. A signed delivery slip, a tracking record that ends at the buyer's door, or a service log all fit here.
Proof of a refund you already gave. Visa's guidelines say a merchant can respond with documentation of a credit or reversal that was already processed for the transaction. If you refunded the customer before the dispute arrived, say so and show it.
Proof the customer dropped the claim. Visa's guidelines say a merchant can provide a letter or email from the cardholder stating they no longer dispute the transaction. A short email from the buyer can end the case.
Proof the goods are still on the way. Visa's guidelines say merchants can respond with documentation supporting the expected delivery date if it has not yet passed. This one applies when the customer filed before the package landed.
There is also a named category of proof. Visa defines Compelling Evidence as proof from a merchant or acquirer that the cardholder took part in or benefited from the sale. Visa's rules say an acquirer may send Compelling Evidence with a pre-arbitration attempt. Orders, emails, and delivery records that tie the buyer to the purchase can all serve this purpose.
One warning about form. When deciding a case, Visa looks at whether time limits were met and documents were supplied, readable and translated. A receipt too faint to read is no receipt at all. If your proof is in another language, it needs a translation.
What happens if you do not respond in time
Doing nothing is a choice, and it is the worst one. When deciding a case, Visa looks at whether time limits were met.
How long do you have? Visa says the merchant's time to respond is the time on the acquirer's request, and it may vary by acquirer. So the deadline in the notice you received is the one that counts. Read it the day the notice arrives, not the day before it runs out.
What you can lose
The loss is bigger than the sale. Visa says a merchant can lose the sale amount and the goods, and also pay its own costs to respond. If you shipped a product and the customer keeps it while the dispute stands, you are out the product and the money. The time you spend building the case is a cost too.
That is why the accept or reject choice matters so much. Fighting a case you cannot win adds cost to a loss you were taking anyway.
How to prevent common disputes
Visa's guidelines give merchants ways to avoid common disputes.
Act fast on your end. Visa's guidelines say merchants should send completed transactions to their card processor as soon as possible, preferably on the day of the sale.
Watch for doubles. Visa's guidelines say merchants should reverse a duplicate transaction if one is entered twice. Visa's guidelines say merchants should review transaction receipts before depositing them.
Refund without delay. Visa's guidelines say merchants can avoid this dispute by processing credits and reversals promptly. A customer waiting on a refund may stop waiting and call their bank instead.
Handle recurring payments cleanly. Visa's guidelines say merchants should send the customer a notification stating that the recurring payment account has been closed.
Check your setup. Visa's guidelines say to avoid this dispute, ensure all transactions are processed with the correct data and your account is set up properly. Visa's guidelines say to avoid this dispute, make sure required authorization is obtained in accordance with the Visa Rules before completing any transaction. Then there are card present sales. Visa's guidelines say merchants can avoid this dispute by making sure the terminal is EMV-compliant and the correct Cardholder Verification Method was obtained.
Train your people. Visa's guidelines say merchants should train staff on the proper procedures for handling terminal issues.
Where to go from here
Every dispute notice is a fork. Accept it when the sale was wrong and cannot be fixed. Reject it when the sale was sound, and send the documents that prove it. Either way, answer before the deadline on the acquirer's request.
The best dispute is the one that never starts. The habits above, same day deposits, duplicate checks and prompt refunds, come from Visa's own guidelines. For the cardholder's view of the same process, see what happens if you dispute a credit card charge or our page on dispute charge meaning.