Understanding Chargeback Reason Codes

Credit card chargeback reason codes are part of doing business. Merchants need to understand what these reason codes are, what they mean, and the impacts of these codes. The underlying problem with chargeback reason codes, however, is their level of complication.

To put it bluntly, there is nothing simple about credit card chargeback reason codes. Each credit card company has its own list of reason codes with its own unique numbering system, time limits, rules, and limiters. Merchants should not assume that there is consistency across credit card companies when it comes to reason codes.

Merchants could spend hours reading through the credit card documentation about reason codes, but this is likely to result in confusion and frustration. The better option is to learn the basics of chargeback reason codes, and if required, know how to get expert help.

The Chargeback Reason Code Format

The ultimate purpose of a chargeback reason code is to explain to the merchant why a chargeback was filed. Each reason code is composed of a two-, three-, or four-digit number. The format depends on the credit card company. Some credit card companies also include a short phrase describing the code and chargeback.

The following are reason codes for the same scenario:

• Visa: Reason Code 30 Services not provided or merchandise not received.
• MasterCard: Reason Code 4859 Services not rendered.
• Discover: Reason Code 4755 Non-receipt of goods or services.
• American Express: Reason Code C08 Goods or services not received or partially received.

These four distinct reason codes are for the same chargeback scenario—the customer did not receive the item or service. This example shows how reason codes can be confusing and ultimately be costly to merchants when the appropriate response is not taken. Confusion over chargeback reason codes results in an inefficient chargeback representment case and added costs.

This also highlights why merchants should consider consulting expert help when taking on the responsibility of managing chargebacks. There is simply too much information to process and often to be done in very limited time frames. Merchants who use an end-to-end solution that works to collect chargeback data are better prepared to respond to a credit card chargeback.

Chargeback Reason Code Resources

It is very important that merchants have quick access to the chargeback reason code documentation provided to them by issuers. This documentation does change, so any updates should be reviewed and stored in a secure location.

Documentation provided by the credit card company includes a description of the reason code, the time limit for the chargeback response, and it explains the evidence requirements needed to dispute the chargeback. Make sure the following documents are accessible:

• Visa
• MasterCard
• Discover – use the resources on Discover Global Network.
• American Express

It is more important that these documents are easily accessible in the event of chargeback.

Chargeback Reason Code Categories

A quick scan of these four resources reveals that there is no consistency across the credit card companies with the number of reason codes. The lists do not match because each credit company categorizes chargeback scenarios differently. Do not assume that because there is a Visa chargeback reason code for a specific scenario that there is one for American Express.

There are 151 distinct reason codes among the four major credit card companies. These reason codes can be grouped into five main categories. It helps to understand these reason code categories, particularly when reviewing chargeback data and looking for ways to reduce chargeback frequency.

• Fraud or No Authorization. There are two distinct scenarios for this reason code category: the customer’s credit card has been violated, or the customer does not remember authorizing the transaction but doesn’t believe their credit card was violated.

• Cancel Recurring Billing. A subscription service or other renewal is in dispute. The customer, for example, cancelled a subscription and was still charged.

• Products or Services. This category applies to claims related to the quality of the product or service. The customer may claim the product does not match the product description or the item arrived damaged.

• Liability Shift. This category applies to any non-chip credit card chargebacks, or fraudulent transactions not blocked by a service like 3D Secure.

• Other. A broad category to capture any chargebacks that don’t fit in the above categories. For example, the cardholder is disputing an exchange rate charge, or the credit card chargeback simply doesn’t fit in any other category.

Based on these reason code categories, it should be clear to merchants that there are steps that can be taken to reduce chargeback occurrences. For example, merchants should always have clear product descriptions on their website, feature a detailed refund/return policy on the website and checkout page, and always retain proof of payment authorization.

Proactive Credit Card Chargeback Response

Chargeback reason codes are complicated. This is why it’s in your best interest to take advantage of the proven professional chargeback resources available. Implementing our end-to-end solution provides your business the top-level protection and data collection needed to detect, prevent, and win chargeback disputes. Please contact us to learn how our team of chargeback experts can support and help you.