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How to Prevent Chargebacks

Chargebacks happen for many reasons, including customer disputes, fraud, payment processing errors, authorization issues, and non-fulfillment of retrieval requests. Although chargebacks cannot always be completely avoided, there are steps you can take to prevent chargebacks.

The more you know about payment processing procedures, the less likely you might be to do — or fail to do — something that could result in a chargeback. Remember though, chargebacks are not always a result of a merchant error; sometimes the payment error can be made by the cardholder, issuing bank, or the acquiring bank. Here are some payment processing management steps that can be taken to prevent chargebacks:

  • Hold on to the card during the payment transaction, this will allow you to examine the card and verify the expiration date as well as compare the signature on the card to the signature on the receipt.
  • For card present transactions, obtain a magnetic stripe reading of the card or an imprint of the card, and ensure that the cardholder signs the receipt.
  • Do not process any payment transaction if the authorization request has been declined.
  • Do not repeat a declined authorization request.
  • For card present transactions, make sure that the sales receipt is legible. You can ensure this by changing the printer paper as well as the printer ribbon or cartridge.
  • Each transaction should be submitted for settlement only once. Do not enter a transaction multiple times.
  • All refund and return policies must be disclosed at the time of the transactions. This policy must be printed on the receipt near the signature line before the customer signs it.
  • Deposit all payment transactions in a timely fashion. This holds true for both debits and credits.
  • Always respond to a retrieval request as quickly as possible.
  • For card not present transactions, use the fraud services offered by the card. This includes the Address Verification Service (AVS), the Card Verification Value 2 (CVV2), the Card Validation Code 2 (CVC2) and the Card Identification (CID).
  • Never accept a payment on a card that is expired.

Although not every chargeback can be remedied, many can be resolved without the loss of the sale. This can be accomplished by providing additional information about the transaction or about actions you took regarding it. Each cycle in a chargeback has specific time frames during which action can be taken. Therefore it is critical to respond promptly to all retrieval requests and requests for chargeback documentation.

Reason codes


Reason codes

Here are some of the most common reasons codes.
1. Reason Code 08, Reason Code 72 and Reason Code NA: No authorization

Probable cause: An authorization was not obtained for a payment transaction.

What should you do now?
  • Provide a copy of the sales slip/transaction documentation showing that authorization was obtained. Merchant services will verify the authorization through the association logs.
  • If authorization was not obtained, accept this chargeback.

Preventive steps
For both card present and card not present transactions:
  • Always obtain a valid authorization on all transactions.
  • If an electronic authorization cannot be received due to a system or network issue, contact the voice authorization center for an approval. If an approval is given with an authorization code, be sure to record this information on the sales slip/transaction documentation.
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2. Reason Code 34, Reason Code 82 and Reason Code DP: Duplicate processing

Probable cause:
The same transaction was submitted for processing more than once.

What should you do now?
  • If both transactions are valid transactions, send legible copies of both transaction receipts. Include any related documentation and clearly indicate that the transactions are not for the same merchandise and/or services.
  • If a credit has already been posted for one of the transactions, reply to the chargeback with the credit information and documentation.
  • If credit has not been issued and the transactions are duplicate, accept the chargeback.

Preventive steps

For both card present and card not present transactions:
  • Enter payment transactions only once.
  • Follow correct void procedures to delete erroneous transactions.
  • Review all batches before submitting for payment processing to ensure that no items are duplicated.
  • Submit batches for payment processing only once.
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3. Reason Code 61 and Reason Code UA30: Fraudulent card not present transaction

Probable cause:
A mail/telephone/Internet payment transaction was processed from an individual using a fraudulently obtained card number. The cardholder issued a complaint with their bank stating that they neither authorized nor participated in this transaction.

What should you do now?
  • If this is an invalid chargeback, and a card was present for the transaction, provide merchant services a copy of the transaction receipt bearing the customer's signature and the card imprint.
  • If AVS was used, review the authorization response to determine:
    • If AVS was supported by the cardholder's bank. If it was not supported and you received a response of a "U" then this is an invalid chargeback and you should provide this information to merchant services along with a copy of the authorization responses.
    • If you obtained a valid authorization, received an exact AVS match (street number and zip code) and the merchandise was delivered to that address, supply the signed proof of delivery and the authorization information to merchant services.
  • If you did not use AVS, accept the chargeback.

Preventive steps

Card present transactions:
  • There are no preventive steps as this is an invalid chargeback for card present transactions.

Card not present transactions:
  • Use the Address Verification Service (AVS) and the CVV2, CVC2 or CID to review for fraudulent activity.
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4. Reason Code 37 and Reason Code UA: Fraudulent transaction

Probable cause: Cardholder is disputing the payment transaction stating that they did not authorize or participate in this transaction.

What should you do now?
  • Provide a copy of a signed sales slip to merchant services.
  • Include proof that the card was present by either a magnetic stripe reading or an imprint of the card.
  • For card not present transactions, send a copy of the proof of delivery bearing the cardholder's signature.

Preventive steps

Card present transactions:
  • Always swipe a card through the credit card machine whenever possible. This will record the presence of the card.
  • If a magnetic stripe reading cannot be obtained, then imprint the card using a manual imprinter.
  • Have the customer sign the receipt.

Card not present transactions:
  • Use the Address Verification Service (AVS) plus the CVV2, CVC2 or CID to prevent fraudulent activity.
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5. Reason Code 75 and Reason Code 63: Cardholder does not recognize transaction

Probable cause: Cardholder reviewed this transaction on their statement and does not recognize the item or does not remember making the purchase. This could be due to an unrecognizable merchant name.

What should you do now?
  • Provide an invoice showing the transaction detail including a description of the merchandise or services that were provided.

Preventive steps
Card present transactions:
  • Always use the most recognizable name on your merchant account.
  • Cooperate with all cardholders who call for more information.

Card not present transactions:
  • Always use the most recognizable name on your merchant account.
  • Cooperate with all cardholders who call for more information.
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6. Reason code 79, Reason Code 01 and Reason Code TF: Card issuer has not received requested copy

Probable cause: The retrieval request was not fulfilled within the given time frame.

What should you do now?
  • If the requested copy has already been sent, provide documentation supporting this submission. Include a copy of the receipt as well as fax confirmation or certified mail receipt.
  • If the requested copy has not been sent, then accept the chargeback.

Preventive steps
Card present transactions:
  • Send a legible copy of the requested receipt to the merchant services processing center within the specified timeframe in your merchant agreement.
  • Be sure to retain all payment transaction information for at least 18 months for Visa® transactions, and at least 3 years for other card transactions.

Card not present transactions:
  • A copy request can be fulfilled with a legible copy of the mail order form bearing the cardholder's signature or a copy of the transaction receipt for a phone order or a substitute receipt. If you choose to fulfill with a substitute draft, be sure to include:
    • Account number
    • Card expiration date
    • Cardholder name
    • Transaction date
    • Transaction amount
    • Authorization code
    • Merchant name
    • Merchant location (online address if applicable)
    • Merchandise or services description
    • Ship to address, if applicable
    • AVS response if used
    • CVV2, CVC2 or CID response if used
  • Respond to the copy request within the specified timeframe on your merchant agreement.
  • Retain all transaction information for at least 18 months for Visa transactions, and at least 3 years for other card transactions.
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