Tom-Chris Emewulu
Chief Disputes Analyst

Suppose you are hearing the term Chargeback Reason Codes for the first time. In that case, Chargeback Reason Codes is a set of alphanumeric codes developed by banks to help cardholders select specific reasons for filing a chargeback.

Credit and debit card issuing networks created Chargeback Reason Codes for merchants to understand why customers dispute purchases and fight those disputes the right way.

The major card brands all have unique alphanumeric strings for chargebacks. And so do online payment processors such as PayPal.

Usually, when a customer contacts their bank to dispute a transaction, the bank files a chargeback based on the trigger, reason code. Upon receiving the notification, the merchant can either accept it or use the issued Chargeback Reason Code to build a solid case to fight the dispute.

In principle, Chargeback Reason Codes are useful in identifying and detailing the reason for a transaction dispute. They make sure there is no room for guessing and opinionating when reconciling a dispute - each party knows what triggers to pull.

But due to the varied reason codes by card networks, Chargeback Reason Codes can be a source of confusion at times. The merchant may not know the specific reason codes for each card brand. And the customer can misapply Chargeback Reason Codes, either as a deliberate shoplifting or human error.

But they don’t have to be a headache for you. We shall cut to the chase for this article by dissecting the Chargeback Reason Codes categories across the major card brands. And evaluate how to address each reason code.

The Chargeback Reason Codes Categories across networks

Reason codes are in a state of constant evolution as customers file more chargebacks by the day. According to research, customers are filing many more chargebacks for reasons that have little to do with the assigned chargeback code.

To help harmonize the process, Visa and MasterCard streamlined their reason codes into four categories. American Express and Discover each provide different types to help categorize their reason codes. In all, there are four major categories of Chargeback Reason Codes.

Reason Codes Category 1: Authorization

This Chargeback Reason Code has to do with all authorization issues, such as when someone makes a transaction without the cardholder’s authorization.

Reason Codes Category 2: Consumer Disputes

Consumer disputes, also known as Cardholder Disputes, Card Member Disputes, and Service chargebacks, involve chargebacks initiated by the customer concerning goods or services purchased.

Reason Codes Category 3: Fraud

The fraud chargeback reason code category represents all forms of fraudulent transactions.

Reason Codes Category 4: Processing Errors

Processing Errors involve chargeback and disputes revolving around processing issues, late presentment, credit processed as charge, invalid card numbers, no show errors, incorrect charge amounts. This chargeback reason code is also referred to as “Point-of-Interaction” Errors.

Go beyond guesswork in your chargeback mediation

If you want to fight a chargeback and win, your compelling evidence must be on the bank's specific reason code.

Every Chargeback Reason Code has unique requirements for documents that can help you challenge the customer claims made with the chargeback. Take your time to review what you need to include in your response.

There is no single chargeback response template - you have to customize your response accordingly. Your chargeback-win rate will depend on your response.

But that is easier said than done, as many merchants have found. The issuing bank immediately adds a reason code when a dispute arises, and it is not likely for them to change it even when the merchant supplies new evidence to invalidate the claim. A chargeback reversal is just a peace offering. You will still have to spend valuable time fighting the chargeback and pay chargeback fees whether you win or lose.

On the flip side, you could automate your chargeback management and have Chargeflow take care of this aspect of your operation. At the same time, you will focus on building your business and meeting your revenue milestones.

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