What is a Chargeback Reason Code?

These codes are helpful because they let merchants see what actually went wrong when a transaction doesn’t work out. Sometimes the customer never received their package in the mail. Other times they stare at their credit card statement and they have no clue what this charge is even for. And then you have situations where they received the product just fine but it wasn’t quite what they thought they were going to buy from the website. Each of these different scenarios ends up with its own code number.

Without these codes merchants would be left in the dark every time a dispute came in. You’d just get a chargeback notification in your email and have no clue how to respond to it. You might wonder if you should find the shipping proof or send over a copy of your return policy. Each reason code tells you the evidence that the bank wants to see from you.

This whole system also helps merchants see patterns in their disputes that they might not have picked up on otherwise. Getting the same reason code over and over again will teach you right where to focus your prevention work. A flood of “product not received” codes might mean that you need to improve your shipping confirmation process. Multiple “unrecognized transaction” codes probably mean that your billing descriptor needs some work.

How It Works

A cardholder calls up their bank to dispute a charge on their statement and the bank assigns what’s called a reason code to help figure out what went wrong. Think of this code as a filing system that shows everyone what happened during the transaction. Based on whatever the cardholder tells them happened, they’ll pick from a standard list of codes.

Once the bank picks the right code the information travels through the entire payment network to eventually reach you as the merchant. From the issuing bank through the card network and then down to your payment processor, it moves through the system – the whole process usually takes a few business days to wrap up.

At this point it starts to get a little messy. Every big card network has built its own separate system of chargeback codes and none of them coordinate with one another at all. Completely different across the board, these numbers don’t match up. Visa might use code 10.4 for fraud cases but Mastercard turns around and uses 4863 for the exact same type of dispute. American Express and Discover have built their own systems as well and each network deals with codes a bit differently from the others.

Once you get hit with a chargeback notification, the very first item you’ll find is the reason code – it’s usually displayed right at the top of whatever document your payment processor sends over. Most processors either email this notification to you directly or make it available through their merchant portal online. Along with that reason code you’ll also see the other important bits about the disputed transaction – details like the total dollar amount and the date when the original sale took place. It shows what the cardholder said when they disputed the charge and any paperwork or proof they sent in to back up their case.

How It Affects Chargeback Prevention

Once you start to track reason codes over time, patterns show up that tell you just where your business needs work. A merchant who sees multiple “product not received” codes every month probably has a delivery problem that needs fixing. Maybe the shipping carrier isn’t reliable enough or the tracking emails aren’t actually reaching customers when they should.

Learning how to match each reason code to the right fix brings the biggest benefit. Authorization errors need one type of repair while quality complaints need something completely different. You can’t just throw the same generic response at every dispute and hope for the best results.

Smart business owners know they need to create an action plan around the chargeback codes that are popping up in their account. Once “fraudulent transaction” codes start showing up over and over, that’s your signal to get some better fraud-prevention software. And if “credit not processed” just pops up month after month, well, that tells you that your refund system isn’t working the way it should be and each of these codes is basically telling you right where you need to focus your energy next.

This focused strategy saves money in two main ways. First you win more disputes because your replies actually solve the actual problem behind each chargeback. Second you avoid future chargebacks by fixing the root problems that cause them in the first place. A merchant who cuts their chargebacks from 2% down to 1% might save thousands of dollars each month in fees alone.

You can also use the data to see problems coming before they explode into a big mess. Maybe you see an uptick in quality complaints right after you switch suppliers. Or authorization errors suddenly spike after you update your payment system. These early warning signs let you fix problems before they turn into expensive chargeback patterns that really hurt your bottom line.

Example Scenarios

To fight this particular chargeback you’ll need to show Visa proof that the actual cardholder placed the order. That means you have to pull together your CVV match results, any email correspondence between you and the customer and the delivery confirmation that shows it went to their billing address. Make sure to include any 3D Protected authentication records as well if you used them during the transaction.

Reason code 13.3 works completely differently and it’s called ” Not as Described or Defective Merchandise.” This type of dispute runs on another track because the customer is admitting that they bought the item from you in the first place – they’re just not happy with what turned up at their door. Maybe they ordered a blue widget and you accidentally sent them a red one or the product broke after two days of normal use.

Your job is to prove that the item matched your description and worked like it should when handling this dispute. Pull up your product listing with the facts and photos right there for everyone to see. Include any quality control records or inspection reports you have on file. Show how you tried to fix their problems when the customer reached out to you earlier about the issue. Sometimes if you give them a quick exchange or refund instantly it can stop these from turning into chargebacks in the first place.

Requirements and Timeframes

A chargeback hits your account and you’re on the clock. Card networks usually give merchants somewhere between five to ten days to pull a response together. That sounds like enough time. Days disappear fast though and it gets even worse when you’re looking through all the paperwork and evidence needed to put together a strong case.

Deadlines change depending on who issued the card and which payment processor you use. Visa gives you ten days while Mastercard only gives you seven. Your payment processor usually takes a day or two for its own internal steps. Missing that deadline means you automatically lose the dispute.

Each reason code also has its own evidence laws. A fraud claim needs different proof than a product-quality dispute. You can’t just send the same documents for every chargeback and hope for the best. Card networks have tight laws on what counts as valid evidence for each code.

You need records here. Most networks need you to hang on to transaction records for at least 18 months – some of them ask for even longer. You’re out of luck when a customer disputes a charge from last year and you’ve already deleted those records. You as the merchant always carry the burden of proof.

Industry laws change all the time and catch merchants off guard every day. Card networks like Visa and Mastercard are always updating their reason codes and changing the laws that govern disputes – usually at least once per year and sometimes even more than that. That winning strategy that you used for a chargeback dispute just last month is unlikely to work the same way anymore because everything has already changed.