How to Win a Chargeback Dispute as a Merchant

Chargeback disputes challenge merchants, impacting revenue and operational efficiency. They occur when a customer challenges a transaction with their bank, leading to a reversal of funds. Reasons range from legitimate issues like dissatisfaction or errors to fraud, including “friendly fraud.” Understanding the response process is important for recovering lost revenue and mitigating financial impact. Successfully navigating a chargeback dispute involves a structured approach, from initial notification to a well-prepared, timely response.

Understanding the Chargeback Notification

Merchants receive a chargeback notification when a cardholder disputes a transaction with their issuing bank, typically relayed by the merchant’s acquiring bank or payment processor. The notification includes a chargeback reason code, an alphanumeric code from the card network classifying the dispute’s primary reason. These codes dictate the specific evidence required for a successful dispute.

It also includes transaction details like amount, date, and sometimes cardholder name or the last four digits of the card number. Merchants must review these details to identify the disputed transaction. A strict response deadline, typically 7 to 45 days, is also specified, varying by card network and reason code. Missing this deadline often results in an automatic loss.

Preparing Your Evidence

Gathering compelling evidence is the most important phase in disputing a chargeback. The specific documentation needed correlates with the chargeback reason code. A well-organized collection of relevant materials enhances the merchant’s chances of winning.

For “merchandise not received” codes (e.g., Visa 13.1, Mastercard 4853), merchants should provide proof of delivery. This evidence typically includes tracking numbers, delivery confirmation, and, for higher-value items, signature confirmation. Documentation showing matching shipping and billing addresses and order fulfillment records are also important.

For “services not as described” (e.g., Visa 13.3, Mastercard 4855), evidence includes communication logs (emails, chat transcripts), signed service agreements, and terms of service acceptance. Screenshots of the service, usage logs, or customer acknowledgments can also be effective.

For alleged fraud (e.g., Visa 10.4, Mastercard 4837), merchants should present evidence of cardholder authorization and transaction legitimacy. This includes Address Verification System (AVS) matches, Card Verification Value (CVV) matches, and the IP address used for the purchase. Records of previous successful transactions with the same card or customer, device IDs, and security questions answered during purchase can also indicate a valid transaction.

General evidence includes transaction receipts, invoices, and a copy of the refund or return policy accepted by the customer. All collected evidence should be clear, concise, and directly address the cardholder’s claim, often compiled with a cover letter.

Submitting Your Dispute Response

After preparing evidence, submit the dispute response to the appropriate entity. Submission methods include online portals from payment processors or acquiring banks, and sometimes mail or fax. Each method has specific procedural requirements.

For online portals, merchants navigate to a dispute resolution section within their payment processor’s dashboard. This interface allows direct upload of all prepared documents, including the cover letter and supporting evidence. Ensure all files are in accepted formats and clearly labeled for review by the issuing bank. The online system often provides immediate confirmation of submission for tracking.

When submitting via mail, use certified mail with a return receipt requested. This provides verifiable proof of delivery, important for timely submission disputes. The physical package should include a professional cover letter, organized supporting documents, and a clear return address. If faxing, retain a transmission confirmation report to confirm successful delivery. Regardless of the method, transmit the complete, evidence-backed dispute package within the designated deadline.

What Happens After Submission

After submission, the process enters a review phase. Resolution typically takes 30 to 90 days, but complex cases or arbitration can extend this to 150 days or more. During this time, the issuing bank reviews the merchant’s evidence and the cardholder’s claim.

There are several potential outcomes. If the issuing bank finds the merchant’s evidence compelling, the dispute is resolved in the merchant’s favor, and debited funds are returned. Conversely, if the cardholder’s claim is upheld, funds remain with the cardholder, and the merchant bears the loss, including the original transaction amount and a chargeback fee (typically $20-$100).

If the issuing bank still sides with the cardholder after the initial response, the dispute may escalate to a “second chargeback” or “pre-arbitration” stage. This allows the merchant another opportunity to submit additional evidence. If no resolution is reached, the case can proceed to arbitration, where the card network acts as a neutral third party for a final decision. Arbitration can incur additional fees, often several hundred dollars. Merchants should monitor dispute status through their payment processor’s portal and be prepared for further steps.