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The Chargeback Process

jjensen | 28 February, 2006 14:42

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The chargeback process is a largely unknown to merchants and can often be a cause for frustration. Therefore, in order to shed some light on this subject let's take a look at the chargeback process used by Visa and MasterCard:

  1. The customer disputes a transaction by contacting their card-issuing bank
  2. The card-issuing bank researches to determine whether the reasoning for the chargeback is valid.
  3. A provisional credit is provided to the customer. The card-issuing bank initiates a chargeback process and obtains credit from the merchant's processing bank.
  4. The merchant's processing bank researches the validity of that chargeback. If they determine the chargeback is invalid they will decline the chargeback and return it to the card-issuing bank.
  5. The chargeback amount is removed from the merchant's account and the merchant's processing bank provides written notification to the merchant.
  6. Did a processing error occur? If so, the sale is re-presented to the card-issuing bank for corrections.
  7. The merchant provides documentation to remedy the chargeback. If the provided documentation is found to be satisfactory, the chargeback is declined and the customer is once again charged for the sale. If the documentation is found to be unsatisfactory, the chargeback is successful and the process ends.

As you can see, there are multiple steps involving multiple parties, and each step requires the responsible party to dedicate a certain amount of time to its management. The resolution of a typical chargeback can take anywhere from six weeks to six months. If each party takes the maximum amount of time to complete a responsibility, it's not hard to see how a chargeback can seem to drag on forever.


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