What Is the Chargeback Period and How Does It Work?

Credit card chargebacks allow consumers to dispute transactions and request refunds through their bank or card issuer. This process safeguards against fraud, billing errors, and other transaction issues. However, chargebacks have strict time limits, known as the chargeback period, which determine how long a cardholder has to file a dispute.

Understanding these timeframes is crucial for both consumers and businesses, as missing deadlines can mean losing the ability to recover funds. Different payment networks have varying rules on when disputes can be initiated, requiring merchants to stay informed.

Common Triggers for a Chargeback

Disputes arise for various reasons. While some stem from fraud, others result from misunderstandings or merchant errors. Recognizing these common causes helps businesses take preventative measures, reducing financial losses and avoiding unnecessary disputes.

Unauthorized Use

One of the most frequent reasons for a chargeback is unauthorized card use, often due to stolen details or identity theft. The rightful owner may notice unfamiliar charges and file a dispute.

To minimize these cases, merchants implement security measures such as EMV chip technology, CVV verification, and two-factor authentication. Card networks also provide zero-liability policies, ensuring consumers are not responsible for fraudulent charges. However, businesses may still face financial consequences if they fail to verify transactions or use address verification services (AVS). If a dispute is upheld, the merchant loses the revenue from the sale and incurs additional fees.

Non-Delivery of Goods

A chargeback may occur when a customer pays for a product or service but does not receive it. This can result from shipping delays, lost packages, or service providers failing to fulfill commitments. If a merchant cannot provide tracking information or proof of delivery, the cardholder’s bank may rule in favor of the customer.

To prevent these disputes, businesses should use reliable shipping carriers and require signature confirmation for high-value orders. Providing tracking details and estimated delivery times helps manage expectations. If delays occur, proactive communication and offering refunds or replacements can prevent chargebacks. Subscription-based services should ensure customers have access to their accounts or digital content to avoid disputes over non-receipt.

Billing Errors

Mistakes in processing transactions can lead to disputes when customers notice discrepancies on their statements. Common errors include duplicate charges, incorrect amounts, or charges for canceled subscriptions.

Customers often contact their bank before reaching out to the merchant, triggering an automatic dispute. To prevent these issues, businesses should have clear invoicing practices, provide accurate receipts, and promptly process refunds for canceled transactions. Automated billing systems with built-in error checks can reduce mistakes. Encouraging customers to report issues directly can resolve many disputes without involving the payment processor.

Quality Disputes

Buyers may request a chargeback if they receive goods or services that do not match descriptions, images, or advertising claims. This includes defective products, items that differ significantly from what was advertised, or services that were not performed as promised.

To reduce these disputes, businesses should provide accurate product descriptions, clear refund policies, and high-quality images. Offering a return or exchange process can prevent disputes from escalating. Service-based businesses should maintain detailed contracts and document service completion with customer approvals. If a dispute arises, merchants can provide evidence such as customer communications, proof of service, or warranty terms to contest invalid claims.

How Timeframes Differ by Payment Network

Chargeback time limits vary by payment network, with each card brand setting its own rules for how long a cardholder has to dispute a transaction. These timeframes depend on factors such as the reason for the chargeback and the type of transaction.

Visa generally allows up to 120 calendar days from the transaction date to initiate a chargeback, though certain dispute categories, such as processing errors, may have shorter windows. Mastercard also provides a 120-day period, but some chargeback reasons, like authorization-related disputes, may have a 45-day limit. Businesses accepting multiple card brands must be aware of these differing deadlines to ensure they respond to disputes on time.

American Express and Discover operate differently from Visa and Mastercard because they act as both the card issuer and payment processor. American Express typically gives cardholders 120 days to dispute a charge, though this can vary based on the cardholder agreement. Discover follows a similar model, with timeframes that depend on the nature of the dispute. Since these networks handle chargebacks internally rather than through a separate issuing bank, their processes may be more streamlined but also less predictable for merchants.

Key Regulatory Factors

Chargeback regulations are shaped by payment network policies, consumer protection laws, and financial industry standards. Government agencies, such as the Consumer Financial Protection Bureau (CFPB) in the United States, enforce rules that influence how disputes are handled, ensuring financial institutions provide fair processes for resolving transaction issues.

One major piece of legislation governing chargebacks is the Truth in Lending Act (TILA), specifically under Regulation Z, which outlines consumer rights for credit card disputes. This regulation requires card issuers to investigate disputes promptly and limits a cardholder’s liability for unauthorized transactions.

In the European Union, the Payment Services Directive 2 (PSD2) introduced stricter authentication rules to reduce fraud-related disputes. Strong Customer Authentication (SCA) under PSD2 requires multi-factor verification for many online transactions, making fraudulent charges harder to execute. These regulations protect consumers while also requiring merchants to implement secure payment methods. Businesses operating internationally must navigate these varying legal frameworks to ensure compliance.

Regulatory bodies also establish guidelines for how banks and payment processors handle disputes. The Federal Reserve and the Office of the Comptroller of the Currency (OCC) oversee financial institutions in the U.S., ensuring they follow fair lending and dispute resolution practices. In cases where a chargeback decision is contested, some jurisdictions allow for arbitration through the card networks. Arbitration rulings can have long-term implications for merchants, as repeated disputes may lead to increased scrutiny or higher processing costs.

Financial Consequences for Merchants and Cardholders

Chargebacks impose direct and indirect costs beyond the disputed transaction itself. Merchants incur a non-refundable fee per dispute, typically ranging from $20 to $100, depending on the acquiring bank and payment processor. These fees add up quickly, especially for businesses with high dispute rates. Excessive chargebacks can lead to increased processing fees, account freezes, or placement in a high-risk merchant category, which may result in stricter contract terms or the loss of payment processing privileges.

Chargebacks also affect business cash flow. When a dispute is filed, the transaction amount is temporarily withheld from the merchant’s account, potentially disrupting liquidity. Businesses with high inventory costs, such as e-commerce retailers, may struggle to manage these interruptions.

Banks monitor chargeback ratios—typically measured as the number of chargebacks relative to total transactions. Exceeding thresholds set by Visa and Mastercard (commonly 0.9% or lower) can trigger enrollment in monitoring programs like the Visa Dispute Monitoring Program (VDMP) or Mastercard’s Excessive Chargeback Program (ECP), leading to additional compliance costs.