Chargebacks are a challenge for businesses that accept payments through credit cards. They happen when a customer contests a charge, and the bank begins a reversal. Thus, knowing about chargeback reason codes is very helpful for merchants as they aim to supervise and address these disputes in an efficient manner. Essentially, these chargeback codes shed light on why the chargeback occurred and also aid businesses in taking steps to avoid future chargebacks.
What is a Chargeback Reason Code?
A chargeback reason code is usually a 2- to 4-digit alphanumeric code. It is given by the issuing bank when a chargeback is initiated. Chargeback reason codes tell the merchants the real reason for the chargeback. Credit card networks have their chargeback reason codes. These codes give key information, which the merchants can then utilise to resolve disputes.
Why are Chargeback Reason Codes Important?
Chargeback reason codes connect the dots for businesses. When a business gets a chargeback, it wants to know why this particular code was sent to it. So, chargeback reason codes are helpful in understanding the root cause of disputes. The reason codes tell businesses what went wrong, whether it was a fraud, an authorisation issue, or a processing error.
By examining these codes, businesses can calibrate their operations, upgrade customer service, and cut down the potential of future chargebacks. Also, knowing the reason for the chargeback gives businesses some understanding of deciding whether to challenge the imposition of the chargeback. If they do so and prevail, financial losses can be lowered.
Chargeback Reason Code List by Credit Card Networks
While every card network has its own set of chargeback codes, these codes typically come into the same overall categories. Let us take you through a brief overview of chargeback reason codes by network.
Visa Chargeback Reason Codes
Visa categorises its chargeback codes in four distinct buckets: fraud, authorisation, processing errors, and consumer disputes.
Any fraud-related chargeback, for instance, will include Code 57 for multiple fraudulent transactions and Code 10 for suspected fraud. These visa chargeback reason codes aid merchants in spotting the actual issue. For example, whether it’s a fraudulent transaction or a processing mistake that led to the chargeback.
Mastercard Chargeback Reason Codes
Mastercard has a four-digit format for its chargeback reason codes list. While many of the codes start with 48, not all follow this pattern. For example, Code 13 pertains to processing errors, and Code 30 relates to fraudulent transactions. Codes such as 4837 are for no cardholder authorisation and 4860 for credit not processed. These are common disputes. Fraud and authorisation issues are leading categories for Mastercard. If a merchant knows about these codes, then they can take remedial action to prevent chargebacks from cropping up in the future.
Discover Chargeback Reason Codes
In comparison to Visa and Mastercard, Discover’s chargeback reason codes are a combination of letters and numbers. Common examples of codes include UA01 for fraud-card present transactions and DA for authorisation-related issues. These codes extend to fraud, processing errors, and consumer disputes. While Discover individually has fewer transactions than giants like Visa and Mastercard, one should have a good grasp on its chargeback codes as they are important for merchants who accept Discover payments.
American Express Chargeback Reason Codes
American Express uses a unique system with chargeback codes. For instance, F10 is for missing imprint and can also include cases related to fraudulent transactions where the card was not swiped. C31 is for goods not as described. These codes assist merchants in tagging labels: fraud, processing errors, or consumer dissatisfaction. Typically, American Express cardholders are likely to have higher transaction amounts. Hence, chargebacks can be potentially more costly for merchants.
Chargeback Reason Code Categories
One can divide chargeback reason codes into different categories. The categorisation depends on the dispute nature. Here is some helpful information on the same.
Fraud-Related Codes
Fraud-related chargebacks are one of the most common. They happen when unauthorised transactions are done.
For instance, Visa’s Code 57 and Discover’s UA01 represent multiple fraudulent transactions. These codes mean that the card was probably stolen or used without any permission from the legal cardholder. Businesses need to boost their fraud detection tools to cut down on these chargebacks, as fraud-related disputes could snowball into significant financial losses.
Authorisation-Related Codes
As you may have guessed, authorisation-related chargebacks happen when a transaction is improperly authorised.
Common examples of such codes include Visa’s Code 71, which refers to declined authorisation due to potential fraud, and Mastercard’s Code 4808, which refers to transactions exceeding pre-authorisation amount. They signal that a transaction was declined or authorisation wasn’t properly obtained. Addressing such issues begins with the merchants making sure that transactions are properly approved before processing.
Processing Errors Codes
Processing errors usually occur when a merchant makes a mistake during the transaction. These errors could be charging the wrong amount or using an incorrect currency.
Code examples include Visa’s Code 12.6 for duplicate processing or Mastercard’s 4842 for incorrect currency code. Thankfully, processing errors can be prevented easily with proper training and attention to detail from the operator's side.
Consumer Disputes Codes
What happens when customers are displeased with the goods or services they have received? It is time to raise consumer disputes. Examples of this code include American Express’s C31 for goods not as described and Visa’s Code 13.1 for merchandise not received. These consumer disputes frequently involve issues like poor product quality or the failure to deliver.
How to use the Chargeback Reason Codes List
By now you may have understood that merchants should learn and use the chargeback reason codes list efficiently. This would help identify the root cause of a dispute and then take remedial action, amongst others.
By re-looking at the code provided with each chargeback, businesses can tap the necessary documentation, such as proof of delivery or customer communications, to fight against the chargeback. Understanding credit card chargeback codes allows businesses to act quickly and decisively, which makes sure they have the proof to address disputes and minimise financial losses.
Conclusion
Chargebacks can disrupt business operations. So, having a good understanding of chargeback reason codes allows merchants to tackle disputes more effectively. By identifying the root cause, be it fraud, authorisation errors, or processing mistakes, businesses could take effective steps to lower the number of chargebacks they receive. A proactive approach from merchants to deal with chargebacks could quickly save time, money, and valuable resources for the businesses.
