Chargeback Processing Time Frames, Fees & Documents: The Merchant’s Guide

Merchants have to know how chargeback processing works. They need to understand time frames in chargebacks. There will also be processing documents and fees.

It’s a busy world. We can’t go into all the details, but we can give an overview and start you off on your journey of knowledge, so you can start to understand how banks handle chargebacks, and how you can come up with the optimum strategy for handling chargebacks in your own organization.

Chargeback Processing: How do they work?

Chargebacks begin when a customer files a complaint about a transaction. Generally, it’s a credit card complaint, but it will occasionally be a chargeback submitted directly to a bank.

Next, chargebacks follow a few typical steps.

Dispute Stages

Step 1: Customer Dispute Initiation

Customers have a lot of reasons they might dispute a transaction. Maybe they don’t recognize a charge, or they don’t receive the good or service they purchase, or maybe it’s defective.

Step 2: Dispute Review by the Bank

The bank checks the details of the claim. A bank might check the details of the transaction, or the customer’s account history. Any data might be relevant.

Step 3: Request Information From Cardholder

Banks might ask for more information from the customer, like receipts, or emails they exchanged with the merchant. The bank wants to establish some proof.

Step 4: Request Information From Merchant

Once they decide it’s a plausible claim—and plausible is an important word—the bank can reach out to you, the merchant, for more clarifying details. This is the point when you hear about the dispute.

Step 5: Bank Makes Decision

At this stage, the bank decides whether to honor the dispute or not. If they decide it’s a good claim, they will refund the customer. The merchant may be liable for fees for the chargeback.

Step 6: Merchant Representment

A merchant can now disagree. Only at this point, after a bank has made their decision. We get one of our industry-specific pieces of jargon. Representment means the process that a merchant takes in the aftermath of a dispute. A merchant might resubmit transactions if they disagree with the bank’s decision, along with whatever extra evidence they might have.

Step 7: Bank Makes Their Final Decision

Banks get the final say in a chargeback dispute. They make a judgment to either refund the charge or let the charge stand based on the evidence the merchant and the customer provide.

Every now and then, there’s still a dispute after this final decision. At that point, either the merchant or the customer can go to the credit card network and ask for further arbitration. At that point, the credit card company makes a final decision.

Communication and evidence are the best tools available to both the merchant and the customer throughout the entire chargeback dispute process.
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Chargeback Processing Time Frames

Different credit card networks process chargebacks at different rates. For example, Visa publish sets of rules that outline their current chargeback policies several times a year.

Each chargeback dispute will have its unique determiners as well.

That said, there are some consistent patterns.
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Cardholder Time Frame

Cardholders have a window when they can initiate a chargeback dispute. In general, that window ranges from sixty to a hundred twenty days after the initial transaction, or from the date they’re supposed to receive the good or service. Although policies of the various institutions, the banks or credit card issuer, will have an impact on that time frame.

When the issuer asks for more information about the transaction from the cardholder that will usually come with a timeframe too. Banks and credit card companies will often set that time frame at around thirty days.
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Issuer Time Frame

The “issuer,” meaning the bank or credit card company, has an obligation to review disputes initiated by cardholders. Banks and credit card companies have differing procedures and policies that will affect the time frame. The details of the dispute will also have an impact. It might take a few days or a few weeks.

Once the issuer files a chargeback, it hits play on a time frame set by the policies of the card network that facilitated the transaction. Generally, that time frame is thirty to forty-five days from the point of the cardholder’s initial dispute.

The issuer creates another time frame when they receive a response to their request for evidence from the merchant. Usually thirty to sixty days.

The policies of card networks and banks impact these time frames. The details of every chargeback will also effect time frames of the dispute process. Resolving disputes, from the first moment that the cardholder initiate them until final resolution, can take several months. It’s good to be aware of it, and better to understand that the best way you can help is completing your part in good time.

Chargeback Processing Time Frames: Acquirer & Merchant

Financial institutions that process credit and debit card transactions, such as acquirers and merchants, are also subject to time frames during chargeback disputes.

Acquirer Time Frame

Acquirers have limited time frames to notify merchants after receiving chargeback requests from the card issuing company. The period can be a few days or up to a week. It will depend on the acquirer’s processes and the rules of the card issuing company.

The acquirer also has a limited time frame to gather and submit evidence when the merchant contests the dispute. Card networks set this time frame, usually from ten to thirty days from the point when the bank receives notice of the chargeback.

Merchant Time Frame

When merchants get notified from their acquirer that a cardholder has initiated a dispute, merchants generally have between ten and twenty days to respond. In that time, merchants should gather information they have about the transaction in dispute. Information like receipts, correspondences with the customer, or whatever else will help their case.

Merchants will have to contest chargebacks within their acquirer’s time frames or they risk the dispute being decided in favor of the cardholder without further review.

Important!

These time frames are in place to ensure all parties get fair treatment during the dispute process. Merchants and acquirers have to respect them in order to facilitate the best outcome of the dispute process. Delays in compliance don’t help anyone.

Chargeback Processing Fees

Disputes almost always incur chargeback processing fees, regardless of the result of the dispute. The merchant is almost always responsible for these fees.

Institutions have differing policies dictating their chargeback fees. The details of the chargeback, such as the good or service purchased in the transaction, also change the fee.

Expect to see fees of $20 per chargeback. Merchants considered higher risk might incur higher fees per chargeback. The Visa Dispute Monitoring Program might label some merchants as “excessive” risks and charge them $50 for every chargeback dispute. Acquirers may add their own fees.

Chargebacks can get pricey. These fees are charged to the merchant no matter how the dispute is resolved.

Documentation to Prepare in the Event of a Chargeback

If you, the merchant, want to challenge a dispute through your representment process, you will need to bring a strong case to the issuing bank. Stronger evidence means a stronger case and better odds that they will reverse the dispute in your favor.

Disputes will differ, but the foundation of your case will always be comprised of compelling evidence. Some examples of that evidence might be…

• Delivery confirmation receipts
• Tracking information
• Signed orders or contracts
• Sales receipts
• Transcripts of any communications you have with the buyer
• Photographs of the cardholder with the product

More appropriate evidence will give you a stronger case. The particulars of the dispute—for example, the reason provided by the customer for initiating it—will help guide your evidence-gathering efforts.

Challenging a dispute also requires a chargeback rebuttal letter. This letter must explain your case, the nature and function of your evidence, and do so succinctly and clearly. You will also have to include a Chargeback Adjustment Reversal Request.

Streamlining Chargeback Management

Chargeback disputes might look like a chain of bad news for merchants from the word go. With good management and a strong strategy, merchants can improve their odds of recovering revenue from the dispute process.

Potentially reversible chargebacks might go unchallenged when they could have been with a more streamlined dispute-handling process. In other instances, a merchant might submit a response, but still not have the chargeback overturned due to an insufficiently well-constructed case. An optimum chargeback processing strategy could address both of these issues. The key is in your approach. A strong strategy will solve a lot of problems.

You need a nimble system that enables fast document retrieval, so you can build a compelling case no matter what unexpected disputes come your way.