Chargebacks Part 2: Understanding the Chargeback Dispute Process

Chargebacks Part 2: Understanding the Chargeback Dispute Process

Find Part 1 of this article at Chargebacks Part 1: A Quick Guide to Understanding Chargebacks and Why They Occur.


As a business, you will encounter legitimate chargeback requests from time to time. Sometimes the event leading to the chargeback was beyond your control, but either way, customer satisfaction is important, so you readily concede and eat the costs. Unfortunately, if chargebacks are a more regular occurrence, they can quickly eat away at your bottom line.

Customer satisfaction is crucial, but you also have the right and responsibility to protect your business from fraudulent or unnecessary chargeback actions. As a merchant, you have the right to file a dispute against the chargeback, often called a representment – a word used to describe the act or presenting the bank with a charge for the second time.

In all honesty, disputing a chargeback is tedious. It’s best if you can solve any issues and avoid the chargeback process if possible, so an ounce of prevention has incredible value here. Still, unless you know that the claim is legitimate you should take measures to protect yourself by disputing the charges.

The Process of Disputing a Chargeback

When you dispute a chargeback, it’s basically your word against the customer’s. From a bank’s perspective it makes sense to lean in favor of the cardholder. After all, the issuing bank is a business too, and keeping their customers happy is key to their success. This means that when you dispute a chargeback, you better have all your ducks in a row.

When you submit a dispute or representment, you’re telling the bank that the charge was in fact valid and that if there is an error with the charge, it is at the fault of the cardholder. To start the process, you’ll need to submit a chargeback rebuttal letter, and persuasive documentation that supports your claim.

Before you start composing the rebuttal letter, it’s important that you fully understand the basis of the chargeback. The issuing bank will assign a chargeback reason code that clearly defines the customer’s complaint. There are 151 reason codes to categorize chargebacks across Visa, MasterCard, American Express and Discover. You can find a complete list of chargeback reason codes on the Worldpay website.

Once you have the full background information, you can then proceed by gathering all the information needed to prove your claim. Unfortunately, there can be quite a lot of it.

Thankfully, if you’re already using a payment service or software most of the information will be easy to find. While the exact information you’ll need to collect is dependent upon the reason code, a list of possible documentation includes the following:

  • A copy of the sales receipt or order form
  • Proof of delivery, including tracking numbers and delivery confirmation when available
  • Proof of dates where service was successfully performed
  • A record of any correspondences between you and the customer, including any proof that the customer indicated that they were satisfied with their purchase
  • Provide proof that billing and delivery address match
  • Evidence that shows the transaction in question involved the same email address, physical address or telephone number where previous transactions occurred undisputed
  • Check the IP address to see if it matches previous orders or is located within close proximity to previous orders
  • Proof that the purchase was made by the cardholder’s family or member of their household.
  • A signature confirmation of the order or a checked accept box.
  • Customer’s purchase history
  • If the dispute involves a company card, seek proof that the person authorizing the purchase worked for the company at the time of the transaction
  • In some cases, social media can be leveraged to help spot fraudulent chargebacks. For example, photographic evidence might exist that the customer received and was satisfied with their purchase or you might find that the cardholder and other parties involved in the chargeback are actually closely connected.

What Happens When You Don’t Dispute a Chargeback?

It really doesn’t matter what the reasoning for the chargeback is, in the end It’s ultimately costly to your business. As a merchant, not only do you lose any and all revenue from the original sale, but the loss cascades to include fees, shipping costs and the time invested in disputing the charge. Sure, you could avoid that last part and not dispute the chargeback at all, but then it’s a guarantee that you’re losing money.

However, defending yourself against chargebacks isn’t all about money. Taking steps to manage your chargebacks is an overall smart move for your business. Here’s a few reasons why.

First, too many chargebacks on your record is bad news. It could be that you’ve just hit a string of bad luck, but repeated disputes damage your reputation and make you look like a business that isn’t always honest in their practices. Banks automatically assume that you’ll want to protect your business, so if you aren’t to blame, why wouldn’t you dispute the claim? In many ways, not disputing a chargeback looks like an admission of guilt.

When a merchant has too many chargebacks on their record, credit card issuers can insist that you be enrolled excessive chargebacks program. These are penalty programs, and the specifics vary depending on the card issuer, but they often include fines, higher processing fees and required education focused on reducing chargebacks.

Finally, a record of disputing chargebacks gets noticed and reduces the likelihood of fraud. Rumor spreads fast about businesses that are easy targets. By standing up against these charges you’re challenging fraudulent behavior and sending a warning to card issuers about potential issues with their card holders.

Now that you’re familiar with chargebacks and how to dispute them, it’s time we start talking about how you can be better prepared for when they do occur, and maybe even prevent some from happening. Join us in part 3 of our chargeback series to learn more.