Shining Light on the Mystery of Chargeback Reason Codes

Bank Chargebacks: To Represent, or Not to Represent
There is nothing simple about chargeback reason codes. Each credit card company has their own list of chargeback reason codes, and along with these different lists come different time limits, definitions, and expected merchant actions. To complicate matters, the major credit card companies (Visa, MasterCard, Discover, and American Express) don’t even use the same number-coding system to describe the reason codes.
So, yes, it’s understandable that you’d be confused. To be honest, it can be a challenge for many in the payments industry to fully understand the ins-and-outs of chargeback reason codes. The best way to really understand this key aspect of the chargeback process is to stick to the basics and the must-know information. You can spend days reading about chargeback reason codes, but this may only make you more confused. We’re going to explain what you really need to know and provide you with some links for further reading and details on reason codes.
Understanding Chargeback Reason Codes
The chargeback reason code should clearly explain why the chargeback has been filed. From reading the chargeback reason code description, you should be able to understand the issue or problem the customer had and why the transaction is being disputed.
Each reason code is composed of a two-, four-, or three-digit number and a short phrase that describes the chargeback (these elements will vary, depending on the credit card company). For example, here are reason codes from each major credit card company:

  • Visa: Reason Code 30 Services not provided or merchandise not received.
  • MasterCard: Reason Code 4859 Services not rendered.
  • Discover: Reason Code 4755 Non-receipts of goods or services.
  • American Express: Reason Code C08 Goods or services not received or partially received.

In this example, we have four distinct reason codes for the same scenario: the customer didn’t receive the purchased items or services. This example highlights why it’s important for you to be familiar with chargeback reason codes, but also why you can’t expect yourself or your team to know every facet of reason codes. There simply is too much information to manage, particularly for your team who may not be chargeback specialists. That is why solutions such as Order Insight™ are so popular; they take the guesswork and confusion out of the entire chargeback process and take the pressure of understanding chargeback reason codes off your shoulders.
However, we do recommend that you have the chargeback reason code documentation easily accessible so that if you are dealing with a chargeback and aren’t using a solution, such as Order Insight or Intelligence Suite, you can quickly find the code, understand what it means, find out the time limit for the chargeback, and learn what evidence you must provide to dispute the chargeback. To help you out, here is the documentation you need:

You’ll notice when reviewing these PDFs that each credit card company doesn’t have the same number of reason codes. This difference in the number of reason codes is so because each group’s issues differ, or they may not have a reason code for a particular scenario.
Chargeback Reason Code Categories
While there are 151 distinct reason codes among the four major credit card companies, these reason codes can be generally grouped into five main categories. No one will expect you to know all 151 reason codes, but it does help to understand the five different categories.
Familiarity with these reason code categories will help you to determine how you can improve your sales process, authorization systems, and customer interaction, thereby reducing the number of chargebacks you receive.

  • Fraud or No Authorization This category applies when real fraud has occurred and the customer’s card has been violated, or when the customer does not remember authorizing the transaction and doesn’t believe their card was compromised. For example, the customer doesn’t recognize the transaction, or the cardholder was charged multiple times for the transaction.
  • Cancel Recurring Billing This happens with subscription services, such as newspapers or magazines, and the customer is disputing a renewal. For example, a customer cancelled the subscription but was still charged, or the customer didn’t know they were agreeing to a recurring charge.
  • Products or Services This category applies to claims related to the quality of the merchandise or service. For example, the customer claims the product doesn’t match the description, or the product arrived damaged.
  • Liability Shift This category handles any claims that involve non-chip credit cards.
  • Other This broad category represents disputes that don’t fall into the above categories. For example, there isn’t an existing reason code for the cardholder’s dispute, or the cardholder is disputing the exchange rate for an international transaction.

You’ll notice from these reason code categories that there are steps you can take to mitigate the number of chargebacks you receive. Examples include: always make sure your refund/return policy is clearly stated on your website; make sure your customer service team keeps detailed records of every communication with a customer; always keep proof of authorization and transaction receipts; and make sure you are complying with the latest industry rules and regulations.
And, yes, chargeback reason codes are still complicated. We hope we’ve shed some light on this complicated area and that you have a better understanding of these codes and what they mean for your business practices. As always, the Verifi team of experts is available to answer questions and to help you protect your business from unnecessary lost revenue.