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Credit and Debit Card Chargeback

A chargeback is the reversal of a prior credit or debit card sale transaction. A credit card chargeback occurs when a cardholder or the issuer (VISA, Mastercard, Discover or American Express) disputes a transaction charged to an account, and the resolution process results in a favorable decision to the cardholder. 

The most common reasons for a chargeback include:
Cardholder does not recognize the transaction.

  • Cardholder did not authorize the charge (may be fraudulent).
  • Processing errors were made during the transaction (e.g., duplicate Processing).
  • The product or service was not received, or the quality was not as expected.

Retrieval Request

If the cardholder questions a transaction on the billing statement, they will contact the issuer to request the documentation of the original transaction. The issuer will send the retrieval request to the acquirer, and the acquirer forwards it to the merchant. The merchant should respond to the retrieval request within the designated time frame to minimize the potential chargeback by providing the following:

  • A transaction sales slip 
  • An invoice
  • Proof of delivery of goods and services

Chargeback Notification

Once a chargeback is filed by the cardholder or the issuer, a debit to return the funds is issued to the university’s bank account for the chargeback amount. Upon receiving the alert from the acquirer, Merchant Services will forward the email notification to the impacted merchant(s) and ask for immediate action. The debit is held by the issuer until the outcome of the merchant’s or cardholder’s response to the chargeback has been determined.

Accept Chargeback

If the chargeback is valid, and the cardholder is entitled to the credit, the merchant shall respond to the chargeback by accepting it within the designated time frame provided in the notification (15 days for Visa/Mastercard/Discover; 20 days for AMEX). The disputed amount will be permanently debited to the merchant’s revenue PTA. 

Dispute Chargeback

If the original transaction is valid, the merchant can dispute a chargeback within the designated time frame by submitting a response to substantiate the charge along with the appropriate documentation, such as:

  • Original sales slip
  • Invoice
  • Proof of delivery of goods or services
  • A copy of the refund policy for nonrefundable fee
  • Indication of whether the item was an in-person, telephone or internet transaction
  • Proof of refund issued to the card
  • Name and address match (for internet transactions)

The merchant will receive a chargeback reversal notification that restores the funds being held back to the merchant after successfully disputing the chargeback. However, if the dispute was ruled in favor of the customer, there will be reversal rejection and the chargeback amount will be permanently debited to the merchant’s revenue PTA. 

Impact of No Action

If the merchant fails to respond to a chargeback (either to accept or reject) within the mandated time frame, then the disputed amount will be permanently debited to the merchant’s PTA, along with an additional non-refundable processing fee of $10 per chargeback. To avoid this financial impact, all merchants should submit a support request to Merchant Services to sign up for Wells Fargo Business Track and/or American Express online portals to manage their chargebacks in a timely manner.

The key to preventing chargebacks is to follow best practices when setting up the merchant account, processing transactions and maintaining sales records, including:

  • Ensure the merchant business name that appears on the cardholder's statement is recognizable.
  • Always provide a telephone number for merchant contact.
  • Respond promptly to retrieval requests from the cardholder or issuer for copies of sales transactions.
  • If the card is declined when dipped/swiped/tapped through a point of sale terminal, do not continue to try and get an authorization. Instead request a new form of payment from the cardholder.
  • Disclose the refund/cancellation policy at the time of the transaction.
  • Deposit all transactions in a timely fashion for both debits and credits.

Dispute Manager is an online application that gives merchants the ability to manage disputes, chargebacks and retrieval requests. It gives merchants the power to take action on their disputes and directly submit dispute documents. This tool will be your resource for everything related to dispute management.

Last Updated: Jan 25, 2022


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