If you make purchases using a credit card, or you are a vendor who’s responsible for processing customer transactions and fulfilling orders, then it pays to know about how chargebacks work.
Chargebacks are basically a mechanism which allows payments made by credit card to be recalled by the original bank that sent them. In theory this is done to protect consumers, but in practice it is also a potential avenue for fraud to be committed.
Every chargeback comes with its own reason code, and getting to grips with this concept is crucial no matter which side of the transaction you’re on. Let’s dive in and discuss chargeback codes in full, to clear up any confusion.
The basics
As the name suggests, a reason code is the element of each chargeback which indicates what was the motivation behind the chargeback itself.
Because each payment platform provider has its own set of reason codes, interpreting them can get complicated, search reason code here to quickly identify the specific examples you encounter.
Chargeback codes are typically between 2 and 4 digits long, and can also feature letters as well as numbers, depending on the provider in question.
The reasons
Regardless of the payment card platform used, there are a few common reasons for chargebacks which are quantified and codified by most operators in this space.
The first is that of the goods or services which were paid for not being received by the purchaser. The second is that of the merchandise not being as described to the customer.
The third is for recurring transactions which have been canceled by the customer, but are still taken by the merchant and so have to be recouped.
There are also codes for fraudulent transactions, or transactions which are duplicated two or more times whether by error or deliberately.
The caveats
The problem with chargeback codes from a merchant’s perspective is that they are usually set in stone once they are initially issued. This means that it is tricky to argue over issues which are apparent from the transaction evidence you have to hand, but are not specifically covered by the given reason code.
There is some leniency when it comes to determining whether a chargeback is legitimate or fraudulent, and merchants may be able to reverse this if they can demonstrate the ways in which the customer was dishonest.
However, there is no way to claim back any fees or other costs that are incurred in the process of fighting chargeback disputes, so there are always going to be expenses that are unavoidable.
The strategies to use
For consumers, it is important to make sure that whenever a chargeback is requested, the reason behind this is legitimate and provable.
You cannot request a chargeback simply because you regret making the purchase in the first place; for this you need to go through the merchant’s return process and receive a refund this way.
It’s also not allowable to request a chargeback because the period of grace provided for returns on a given item has come to an end. Be honest, only make chargeback requests if you’ve suffered unfair treatment at the hands of a merchant, and avoid contributing to the rise in payment card fraud.
For businesses, knowing chargeback codes is only half the battle. If you do need to fight chargebacks that you believe to be fraudulent, it is worth getting the assistance of experts, and also to implement chargeback management platforms which are tuned towards minimizing this type of incident, and streamlining the processing of any problematic chargebacks which occur.
