Call (844) NO-DISPUTES
AC: Declined Authorization
Merchants who process transactions after Discover declines the authorization are automatically liable for chargebacks under Reason Code AC and it’s one of the worst process mistakes in payment processing because it bypasses the security protocols that are in place to protect everyone involved.
AC chargebacks are almost impossible to win and the reason for it is pretty simple. They happen because of authorization violations at a basic level and no amount of paperwork can fix that. AC disputes need to have a valid approval code. But that code isn’t there when the authorization was declined. Even a handful of these chargebacks can trigger tracking programs and damage your relationship with the payment processors.
How It Works
When a customer’s card gets declined, that should be the end of the transactison. Usually, it is. Every once in a while, the process doesn’t go that way. Maybe the cashier decides to swipe the card one more time, or they’ll type in the numbers by hand instead. Sometimes the sales team will override the decline because they know the customer and want to help them out. These workarounds can look like helpful customer service at the time.
Here’s what actually happens when a card gets declined. First your payment terminal sends an authorization request over to Discover’s network. The bank that issued the card takes a look at that request and sends back a decline response. This response comes with a code that explains why the card was declined. Discover logs this decline in their system the second it happens – and that happens right then and there. Each attempt that you make and every response that comes back gets recorded. It all builds up into a computer record that Discover can pull up and review whenever they need to.
Problems start to multiply when anyone on your entire team decides to get creative with that declined card. Some merchants will run the card multiple times. But they’ll break it up into some smaller amounts to see if one of them goes through. Others will switch their terminal over to manual entry mode and type the card numbers in by hand. A handful of merchants will even process the entire transaction in an offline mode and then submit everything for settlement at the end of the day. Right then, these workarounds probably feel like you’re just helping a customer to finish their sale.
Discover’s network doesn’t forget any of this. When that forced transaction comes through their system during settlement, their software matches it up against those authorization records from earlier. The system flags that you pushed through a payment after you got a decline response. Once this happens the cardholder’s bank can reverse the transaction automatically and you’ll wind up with a DA chargeback on your account. This type of chargeback is nearly impossible to dispute because you broke one of the most basic requirements of accepting card payments.
How it Affects Chargeback Prevention
Force a transaction through after it’s been declined, and you break the cardinal law of payment processing. Payment networks see this as a big violation, and these chargebacks are almost impossible to win. The authorization was denied for a reason, and when you went ahead without approval first, you lost any chance to defend yourself later. No amount of evidence in your favor will change that outcome.
Each one of these chargebacks adds up and pushes up your ratio, and payment processors watch these numbers extremely closely. when you hit the thresholds, you’ll get placed into expensive oversight programs that have high fees and lots of scrutiny. Continue down this path and your processor might choose to shut down your merchant account completely, leaving you with very few options to accept payments later.
Even just a handful of these chargebacks can do real damage to your reputation with Discover and other card networks. Forced transactions are seen as a serious violation of their network laws, and they don’t take them lightly. Your payment processor will also start to question if you can be trusted to handle transactions properly. Reputation damage like this takes a very long time to repair, and in some cases, it can follow you around for years.
Merchants who force declined transactions as a habit also usually process real fraudulent payments at a much higher rate. Cards get declined by banks and networks for legitimate reasons. If you push the transaction through anyway, you usually allow the fraud to slip through the cracks. This creates even more problems down the line and adds fuel to an already bad situation.
Example Scenarios
A customer’s card gets declined at checkout and your employee feels the pressure to help. Maybe it’s a familiar customer who always pays on time, someone they know and want to take care of. Your employee runs the card again and then a third time, maybe even a fourth time – even though that first attempt came back as a decline. Or maybe they type the numbers in manually to get around what the system is telling them. They think they’re just doing their job and taking care of customers. What they don’t see is that they’ve actually just created a big problem for your business.
This situation happens all the time in retail. Employees don’t want to have those awkward conversations with customers, especially when the store is busy and there’s a line of customers waiting to check out. Hotels and car rental companies run into their own version of this exact same issue. A front desk agent at a hotel is working a busy Friday night shift. A guest walks up to check in for their reservation. But when the agent runs their card for the deposit, it gets declined. The system is telling them no. The guest insists that they have money in their account and that this is probably some mistake. Or they mention that they’re a loyalty member or that they’ve stayed at this property before and never had any problems. The agent makes a call to override what the system is telling them and to push the transaction through the property management system anyway. The guest needs a room for the night and the hotel needs to fill that room and bring in the revenue.
Employees who do this aren’t intentionally trying to break any policies or cause problems. They want to close the sale and keep customers happy and coming back. Here’s the problem – when they get around a declined authorization, they’re putting your entire business on the line. Authorization systems decline transactions for legitimate reasons and when your entire team finds ways to work around those declines, it leaves your business wide open to chargebacks that you won’t have any way to defend against.
Requirements and Timeframes
When Discover sends you a DA chargeback notification, you’re looking at a 10-day window to get your response in. And just so we’re on the same page, we’re talking about 10 calendar days from the time that you receive it – not business days, calendar days. Missing that deadline means the dispute is over and you lose by default. Discover doesn’t grant any extensions on these, and there aren’t any exceptions to this deadline.
The paperwork side of it is pretty demanding too. Authorization logs and transaction records are required, and Discover is going to want to see the exact approval codes that came through on your end. Going with voice authorization at some point instead of the standard electronic process means you’ll need proof of that phone call along with the reference number that was issued during that call.
DA chargebacks are really unforgiving when it comes to authorization violations. Discover has zero tolerance for these mistakes. Other chargeback reason codes might give you a bit of wiggle room or allow you to explain unusual circumstances that affected the transaction. DA chargebacks don’t work that way. If the right authorization wasn’t obtained, you’re almost certain to lose the dispute.
Voice authorizations can be valid in some situations. Maybe your terminal went down, or the network had connectivity problems at that time. In either case, you’ll have to follow Discover’s exact procedures for these backup authorizations to the letter. Call the correct number, get the reference code that they give you and make sure you record everything right away.
DA violations leave you with almost no successful defense options once they’ve been filed. You can submit all of the paperwork exactly right, have every document in order and still lose the dispute if you didn’t follow the authorization procedures correctly.
Frequently Asked Questions
What happens if I already processed a declined transaction?
When you process a declined transaction anyway, you're going to lose the chargeback that follows. I'd love to tell you otherwise but the options for defending yourself in this situation don't exist at this point.
First, you'll have to document any authorization codes that you might have received, even if they don't seem relevant right now. A chargeback is almost definitely coming your way, so you'll have to get ready for it as soon as possible. Reaching out to the customer for another payment method could help you get paid. But it won't stop the chargeback from being filed.
The uncomfortable reality of the situation is that you processed a transaction that should have been declined. Attempting to dispute this kind of chargeback is a lot like trying to win an argument when you know you're in the wrong - it takes up time and energy without getting you anywhere.
The better move at this point is to accept the outcome and make sure that it doesn't happen again. Your payment procedures need to be updated right away - not next week or next month. Everyone on your entire team needs to understand that they should never override a declined authorization. When a card gets declined, they need to be trained to ask the customer for a different way to pay instead.
Plenty of merchants still choose to dispute these chargebacks despite all of this. Most of them lose. Card networks have very specific policies about declined authorizations. Ignore the decline and you'll be the one responsible for it. Accept the loss on a and focus your attention on building better processes that will protect you later.
Can I fight a DA chargeback with customer confirmation or signature?
When a transaction gets declined and you process it anyway, you've just made one of the biggest mistakes a merchant can make. Discover calls this aDA chargeback, and it's one of the worst authorization violations in payment processing. Even if your customer begged you to run the card again or promised to pay you back later, none of that's going to matter to Discover.
Merchants tend to get confused at this point. Maybe you have an email from the customer that says they authorize the charge. Maybe you even have a signed receipt or some written agreement. Discover doesn't care about any of that because their authorization system gets to make the final call. If the system said no, then the answer is no - period.
DA is different from the other authorization problems that you might run into. With an AT code, maybe you waited too long to process the authorization, or maybe you charged the wrong amount by accident. Mistakes like these happen, and any merchant could make them. An NA code means you forgot to ask for authorization - sloppy but it's understandable. DA is a whole different animal because you got a direct rejection from the system and then decided to ignore it anyway.
The payment networks designed these policies to protect everyone in the transaction. When you process a declined transaction anyway, you're working around a security measure that was put in place for a good reason. The customer's bank had a reason to decline that transaction, and your agreement with the customer - no matter how official it looks - doesn't override that call.
What documentation do I need to fight a DA chargeback?
Discover Reason Code DA chargebacks can be frustrating to deal with. But what you'll have to provide is pretty simple. To win one of these disputes, you'll need to show proof of an authorization approval. You need the exact approval code, along with the date, the time and full transaction amount.
Your authorization logs have to show that you received an approval for the exact dollar amount in question. A decline message won't help you with this one. The approval code needs to match up exactly with what you're claiming, or Discover will reject your representment without a second thought.
There are a few alternative options that are worth mentioning. Proof of a full refund processed before the cardholder filed their chargeback might settle the dispute in your favor. You could also send in evidence that shows the transaction in question was a different charge that you did authorize correctly.
Approval codes are everything for DA chargebacks. If you don't have a real approval code that matches your transaction info, your odds of winning are slim. I'd recommend you skip the other documents like customer emails, shipping confirmations or product photos. None of those will do you any good for this specific reason code.
Banks and card networks want to see proof above all else - that you received the authorization to charge the card before you ran the payment through. Your defense won't hold up without proof that the authorization happened.
How quickly must I respond to a Discover DA chargeback?
Discover gives you 30 days to respond to a DA chargeback and this deadline isn't something you can negotiate your way out of. Miss it and you automatically lose the case, no matter how strong your evidence might be. The clock starts when you get that chargeback notification, so you should stay on top of your payment processing timeline if you want to protect your business.
These deadlines approach faster than plenty of merchants realize. Your payment processor could have their own internal cutoffs that come even earlier than Discover's 30-day limit, so one of your first steps should be to check with them about the exact deadlines that you're up against. And even if you're planning to accept the chargeback and just move on from it, it's still worth your time to submit a formal response because it can save you from some extra penalties or negative marks on your merchant account down the line.
Prevention through solid authorization practices is always going to be your best strategy. When the chargebacks do happen, you'll need to follow all of these deadlines closely if you want the best shot at a positive outcome. For tough chargeback situations or to make the whole dispute management process stronger, chargeback specialists can help you to take care of these strict requirements and improve your success rates over time.