Call (844) NO-DISPUTESWhat is a Credit Card Dispute?
A dispute is when a customer calls their bank to question a transaction on their statement.
It happens after they see a charge they don’t remember or think is wrong. Maybe they forgot about a subscription renewal or their spouse bought something without telling them. Next comes contact from the bank asking you as the merchant to provide proof that the transaction was legitimate.
Most business owners miss an important difference between a dispute and a chargeback and this mix-up usually costs them money. A dispute isn’t the same as a chargeback – it’s more like a heads-up before the bank decides to take any action against your merchant account. You still have a real chance to make the situation right at this stage which is great news. I see merchants all the time who could have avoided these problems if they’d just understood what was actually happening from the start. Showing the bank that the original transaction was completely above board and sending the right paperwork makes the whole situation just disappear. No fees will hit your account with no penalties to worry about and no negative marks showing up on your merchant account history.
Looking at what happens with disputes reveals an interesting pattern. About 60 to 70 percent of disputes turn into full chargebacks if merchants ignore them or respond too late. Fast responses with strong records mean that most of these disputes will work out in your favor.
Customer disputes that turn into chargebacks can really hurt with chargeback fees – anywhere from $20 to $100 for each one that hits your account. Payment processors don’t like businesses with too many chargebacks and they’ll start flagging you as a risky merchant. Build up too many of these incidents and your processor might shut down your merchant account altogether. Most of these problems can be avoided if you address disputes fast and know what you’re doing.
How It Works
Most customers call their bank first when they want to dispute a charge. Sometimes they can’t find the transaction anywhere on their statement and other times they’re just not happy with whatever they ended up buying. Banks will listen to everything and then make the call about moving forward with the dispute process. That’s when merchants start to feel the heat – once the bank has actually decided to move ahead with the whole situation.
Payment processors will send a notification about the dispute either through email or in the merchant portal. Each notification comes with areason codeexplaining why the customer complained in the first place. These codes can be pretty confusing because each card network uses completely different numbers for the exact same problems.
Most merchants get somewhere between 7 to 10 days to respond. That isn’t much time for a busy business owner. Some disputes actually start as quick questions where the bank just wants more information about the transaction. Others jump straight to chargebacks where the money gets pulled from the merchant account instantly.
Each big credit card company has its own way of handling payment disputes and which card network you have to work with can affect how your case turns out. Visa tends to let merchants and customers try to work it out on their own before any official chargeback process starts. Mastercard takes a different strategy and pushes disputes through its system faster. American Express usually backs its cardholders in these disputes. It does give merchants more time to pull together evidence and build their case though.
Remember that banks always protect their customers first. They’ll reverse the transaction and ask questions later. Any merchant’s main job is to prove that the charge was legitimate before that deadline passes.
How it Affects Chargeback Prevention
Customers who file disputes with their bank give you a chance to fix the problem before it turns into a full chargeback – this little window of opportunity is where merchants save themselves money and problems.
Each dispute that shows up in your inbox is trying to tell you something about how your business runs – and it’s probably something you’d rather not hear. You need this information. Billing disputes are a perfect example. Maybe customers are contesting these charges because your billing descriptor is so confusing that they have no idea what they bought from you. Or maybe your actual shipping times are running far longer than what customers expected based on what you told them at checkout. Look closer at these patterns and you’ll see what has been causing all the issues in the first place.
You can usually resolve the disputes before they become chargebacks. Catch one early and reach out to the customer and you might find that it’s just a small misunderstanding. A quick phone call or email can straighten matters out and the customer will pull back the dispute.
Some merchants view dispute alerts as nothing more than an annoying expense. That misses the bigger picture. These alerts actually help you fix problems right where they start. If ten customers are disputing charges because they forgot about their subscription renewal, maybe you need to send out better reminder emails. If customers dispute because they never received their order, you probably need to improve your tracking notifications.
It works. Merchants who actively manage their disputes almost always see much lower chargeback rates than the ones who just ignore them until it’s too late.
Example Scenarios
A notification about the dispute will arrive fairly soon and your first move should be to check your records and find that original transaction. Pull up their full order history along with any confirmation emails you sent them and for subscription-based purchases grab their first signup confirmation and any renewal notices too. With these records in hand, you can build a strong response that obviously shows proof of their order.
Shipping delays cause plenty of issues with disputes too. A customer places an order and it takes longer than they expected, so they start worrying that their package got lost somewhere along the way. At that point plenty of customers will file a dispute claiming that they never received their item. Up-to-date tracking information ends up being your lifeline here. Showing that their package is still moving through the shipping process will convince most customers to wait a little bit longer for delivery.
Online products and services can be especially tough. A customer might buy something like a software license or access to an online course, then turn around and claim that they never actually received what they paid for. Your system logs show that they downloaded the software or logged into the course platform multiple times over a few weeks. Document everything and attach lots of screenshots of their account activity in your dispute response.
Requirements and Timeframes
Once a customer files a payment dispute against you, that countdown timer starts instantly. Most card networks will give you somewhere between seven to ten days to get your response together and these deadlines don’t mess around. Miss it by even a single hour and you’ll have automatically lost the case. Your account gets drained of the disputed amount and there’s basically no way to get it back through an appeal.
Different card networks have different laws for these timeframes. Visa might give you a full ten days to respond. Mastercard on the other hand could cut you down to just seven days. Your deadline can also change based on the dispute type – fraud cases usually have much tighter deadlines than complaints about product quality or service problems. These differences matter because they determine how fast you need to move when a dispute lands in your inbox.
Card networks want to see what they call “compelling evidence” for your chargeback response – that means you’ll need to pull together your transaction records, any shipping confirmations from your files and every email or message that went back and forth with that particular customer. Signed receipts are valuable too – even more so when you have them from the original transaction.
File format laws turn out to be a bigger deal than most merchants think. Different networks run with completely different standards for what they will actually accept – some of them are strict about only processing PDFs while others demand file types you’ve probably never dealt with before. Submit your paperwork in the wrong format and your entire response will get rejected before anyone even takes a look at all that evidence you worked so hard to pull together.
Dispute management works like a fire drill. Waiting until the alarm goes off to plan your way out is way too late. You need to have a system ready to go before any disputes show up at your door. Make sure to keep your records organized so everything’s right at your fingertips and that you know which team member will take care of the replies when they come in. Above all else, treat each and every deadline as an absolute must – because the card networks sure do.
Frequently Asked Questions
What's the difference between a dispute and a chargeback?
Plenty of business owners think that disputes and chargebacks are the same concept. That makes perfect sense on the surface. Most of them have no clue that these are actually two completely different beasts that call for completely different strategies. A customer questioning a charge with their bank or credit card company is what we call a dispute. Disputes are the much better scenario for you as a merchant because you still have some control over the outcome. You can call the customer directly, find out what went wrong and maybe even get the whole mess resolved before it costs you big money and drains your time.
A chargeback kicks in after the dispute process has already finished running its course. At that stage of the game, the bank has already taken the money directly from your business account and handed it right back to the customer who filed the complaint against you. You're stuck in the unfortunate position of having to fight to get your own money returned and the window of opportunity to head this whole situation off has already closed on you.
Timing matters in each of these situations. Disputes that land in your inbox usually give you just a few days to respond and resolve the situation. Banks actually want to see if you can work it out directly with the customer before they push it any farther. After it turns into a formal chargeback, you're looking at a longer, messy process that can drag on for weeks or even months.
Your response strategy has to match your position in this whole timeline. During the dispute phase, speed is the priority and plain old-fashioned customer service can actually solve these problems. A lot of times the customer just forgot that they made the order in the first place, or maybe your business name shows up strangely on their credit card statement and they have no idea what it means. Problems like these are usually easy to sort out once the issue comes into focus. In full chargeback territory, customer service alone won't cut it anymore - now you are going to need records and strong evidence to wipe out any doubt that the transaction was completely legitimate.
How long do I have to respond to a dispute?
Dispute timing can make or break your whole chargeback game. Most big card networks will give you somewhere between seven and ten days to get your response sent in. That sounds pretty fair. This timeframe isn't actually standard everywhere. Different dispute types come with their own deadlines and each card company has its own laws on top of that. Your payment processor might even need your response materials way before the official deadline hits.
Merchants get caught off guard by how unforgiving these deadlines can be. Miss your deadline by even a single day and you'll lose the dispute instantly - it won't matter if you have perfect evidence or if the customer is obviously trying to scam you. You just run out of time and you're stuck taking the loss.
Get your dispute alerts set up fast. You want instant alerts the second that any dispute activity shows up in your merchant account. Your response process should already be worked out and ready to go whenever you need it. Have response templates ready for the most common dispute scenarios and quick access to all your transaction records and backup materials.
I've seen plenty of merchants learn this lesson the hard way. A dispute notification comes in and they think they'll handle it tomorrow morning. Operations get busy and other tasks pile up and suddenly a full week has passed before they remember to check on it - then the deadline has already come and gone and their money is gone forever.
Treat every dispute like it runs out in only half of the time that the network actually gives you - this built-in buffer will save your business when unexpected delays or problems come up during your response prep.
Can I prevent disputes from becoming chargebacks?
Most business owners miss the fact that they actually have a window of opportunity to manage the whole situation when a customer files a dispute against them - before it turns into a full chargeback. Move fast and come back with solid evidence that supports your side of the story. Get your receipts and any tracking numbers you have and every email thread you had with that customer. Sometimes the simplest fix is to pick up the phone or send a quick email to the customer directly - half of the time they'll drop the dispute on the spot.
Your odds of success usually depend on the reason behind the dispute in the first place. If they claim they never received their package but you have delivery confirmation, that's usually straightforward to fix. Fraud claims are much harder to fight though. Banks usually side with their customers on those types of disputes and for understandable reasons.
Strong documentation goes a long way when payment disputes start showing up. You should save the transaction details and write down each customer interaction as it happens. Your refund and return policies need to be easy to find on your website and written in language that actually makes sense to visitors. Once a dispute lands on your desk it's time to run the numbers on if a refund costs less than the chargeback fees and the hassle. Usually the smartest move for your business is to just eat the loss and put your energy into the next customer instead of being stuck in a fight that might not even be worth it.
Every chargeback dispute is different and there's no magic formula that works every time. Merchants who jump on it instantly and put together strong documentation do way better than the businesses that take forever to respond. Most business owners get caught off guard by the fact that winning these cases isn't always about being right. Strong evidence ready to go when it matters most - that's what makes the difference.
What evidence do I need for dispute responses?
Each chargeback dispute is different and every case needs its own strategy. Payment laws keep changing. Stay up to date with the new laws like Visa's recent updates and you'll succeed with more cases. Ignore these changes and you'll lose more. Experience has taught me that preparation makes all the difference when these disputes come to you.
Strong evidence collection is one of your best tools for protecting the business revenue. Evidence laws change quite a bit depending on what caused the customer's dispute. Non-receipt claims work best with delivery confirmation records. Cancellation disputes need signed service agreements or contracts. Quality complaints usually depend on customer communication logs and service records. Keep your evidence organized and pick the specifics that directly match the dispute reason.
Quality beats quantity every time with paperwork because filling your response with unrelated documents just makes reviewers work harder and doesn't help you much. Spend some time at the start to gather the right evidence and you'll have the best chance at keeping that revenue in your account where it should stay.
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