RN: Credit Not Processed

Most of these disputes happen when returned merchandise or canceled services just sit around in the system for far too long without anyone processing them – this delay gets customers frustrated and impatient so they usually wind up calling their bank instead of trying to work it out with the merchant directly.

Most merchants miss the fact that RN chargebacks are actually warning signs pointing to much bigger problems with how they run their entire refund process and communicate with their customers.

How It Works

A customer expects a refund that never shows up on their statement and the chargeback process gets set into motion very fast. Maybe they returned an item to your store and you promised to credit their account within five business days. Two weeks go by and they’re still waiting for their money to come back.

At that point the customer calls Discover to dispute the charge. They’ll talk about how they were supposed to receive a refund but it never actually came through. Bank representatives will ask for a bit more information about when the return happened and what the merchant said they would do. Most banks have automated systems that flag these disputes instantly.

After the bank checks the basic info, they send a chargeback notification to your payment processor with the original transaction info and reason code RN. Usually you’ll hear about it within 24 to 48 hours through your merchant account dashboard and the clock starts once you receive this alert.

Between seven and ten days is what you’ll have to respond with evidence though different card networks have slightly different deadlines. Each card network follows the same process – you’ll need to show proof that you already issued the credit or talk about why you haven’t been able to process it yet. Your payment processor will send whatever documentation you give them back to the customer’s bank for review.

How it Affects Chargeback Prevention

Each one of these disputes has a direct effect on your chargeback ratio and if you’re not paying attention they can push you faster into those expensive oversight programs that nobody wants to get stuck with. Every RN dispute gets counted against you and it doesn’t matter if it was an honest mistake on your part or not.

It’s not always easy to tell the difference between an honest refund oversight and friendly fraud. Some customers never received their refund and others know full well that they already got their money back. These customers file the dispute anyway because they think it’s a sure win and that’s why prevention matters so much. You need to guard against either scenario.

Your best defense against these problems starts with creating a strong paper trail for each refund that you process. Refund management requires that you document each step along the way – it creates the evidence that can protect you later on – this documentation can be your best shield if a dispute shows up weeks or months down the road.

Automated refund systems actually do double duty in these situations. They help you process returns much faster and keep customers happy from the start. They also create timestamps and tracking records that can prove when and how you sent the money back. These systems turn what used to be a totally manual headache into a streamlined process that more or less defends itself.

Financial stakes with these disputes are pretty big. Lower chargeback ratios mean that you get to hold on to your preferential processing rates and stay away from those oversight program fees that can add up fast over time.

Example Scenarios

Retail businesses see this scenario all the time. A customer brings back a dress to your store on December 28th and your staff takes care of everything quickly and easily – they accept the return and let the customer know that the refunds usually take three to five business days to show up. Everything seems fine until the holidays throw everything off. Your accounting team is short-staffed and the refund doesn’t actually go through until January 7th. Their credit card statement closes on January 2nd and all they see is the original charge with no refund anywhere to be found.

You can predict what happens next. They call their credit card company to dispute the charge because they assume you’ve completely forgotten about them. You’re stuck with a chargeback even though you were planning to process that refund anyway. These timing problems happen all the time – it’s also the case after Black Friday and during the December holiday rush when the return volumes can triple overnight.

Another situation that takes them by surprise has to do with subscription billing. A customer decides to cancel their monthly software subscription on the 15th. Your automated billing system has already queued up their next charge for the 20th though. Nothing lines up between the cancellation and the automatic charge. Once they see that the charge hit their account after they’ve already canceled, they’re going to file a dispute instantly. To be fair, they have every right to be frustrated – your billing system just had terrible timing.

Partial refunds can create even messier situations than the full ones. A customer places an order for three items totaling $150 but winds up returning two items worth $100. You process what looks like the right refund amount. They expected to receive $110 though because they completely forgot about that 10% discount code they used during checkout.

Requirements and Timeframes

A chargeback dispute gives you roughly ten days to pull your response together. Miss that deadline and the case is over – you lose instantly. No exceptions or do-overs once that window closes. Each card network has different timeframes and works with matters in its own way.

Some networks might give you ten calendar days while Visa only counts business days. Mastercard has its own set of regulations that can change depending on the dispute type and each network manages these deadlines differently so you need to check the regulations for each one.

This catches merchants because they assume that starting the refund process within the deadline is enough. Sadly that’s not how it works. You need the credit to actually show up on the customer’s statement within that timeframe. Starting a refund on day nine and letting the processing take five days means you’ve already missed your window.

European regulations make matters harder. Under EU distance-selling regulations, customers get fourteen days to cancel most online purchases – and this applies no matter what your standard return policy says. Not honoring these cancellation rights means official penalties will follow on top of the chargeback itself.

Your paperwork is your strongest line of defense in these situations. Keep your refund records for at least thirteen months though some networks make you hold onto them for eighteen months. Store everything from the original transaction info to any customer communication about the refund. Old transactions can pop up again as disputes when you least expect it.