Most Common Causes of Credit Card Chargebacks

The following are the most common causes for credit card chargebacks, and possible defenses where applicable. When you receive a chargeback notification from your merchant processor, it will typically reference one of these reasons.

• Non-Receipt of Requested Item
  If your merchant processor asks you to provide a copy of a receipt or authorization for a transaction, and you do not supply it by the deadline, the transaction will be deemed a chargeback, and you will not be able to defend or reverse it. (See Retrieval Request Letter below.)

• Unauthorized Mail Order/Telephone Order Transaction
  The Cardholder denies that they authorized a sale by mail or telephone. This might happen if the Cardholder does not recognize the charge, or if another authorized user of the account does not recognize the charge.

• Possible Defense: Supplying a facsimile draft as proof that the order was actually placed, supplying a copy of a signed authorization received via mail, or providing a telephone recording of authorization. Because there are no signatures involved in these types of transactions, you should keep all records of shipping to assist in proving the Cardholder initiated the transaction.

• Duplicate Processing
  A Cardholder is charged two or more times for the same transaction, and only authorized one.

• Possible Defense: Supply proof of more than one authorization with different invoice numbers, or supply proof of credit for the duplicate transaction being made to the Cardholder.

• Non-Receipt of Merchandise
  The Cardholder states that they authorized the sale and were billed for the item, but never received the merchandise.

• Possible Defense: Supply proof of a shipping receipt signed for by the Cardholder.

• Compliance Case
  If an issuing bank, MasterCard or VISA deems that a merchant has not complied with the Rules and Regulations set forth by the Card Organizations, a pre-compliance case is initiated to the merchant processor explaining the rule violation that has taken place. An example would be excessive surcharge fees to the customers for using a credit card in the merchant's establishment. MasterCard, VISA and/or your merchant processing provider may send you a letter of explanation and supporting documentation covering the violation and explaining any fees or penalties that could be imposed in addition to the Chargeback. Should you fail to correct the violation, fees or penalties could be assessed or your merchant processing account could be terminated.

• No Credit Issued
  Merchandise is returned, and a credit is not received for processing.

• Possible Defense: Provide proof that a credit was issued.

• Improper Authorization
  The sales records or authorization is, or is alleged to have been executed, accepted, endorsed, completed or assigned improperly, without authority, or not in accordance with the authorization requirements or any other provisions of your merchant processing Agreement or the Visa/MasterCard Rules.

• Dissatisfied Cardholder
  The Cardholder disputes the sale, quality or delivery (or availability for prearranged pick-up) of merchandise or the performance or quality of service covered by the sales records or agreement accepted by such Cardholder.

• Breach of Duty
  The circumstances in which the transaction was authorized and/or executed involved a breach of any term, condition, representation, warranty or duty you have under your merchant processing Agreement or the Visa/MasterCard Rules.

• Split Transaction
  Multiple sales records or agreements were executed to avoid the need to obtain authorization necessary to complete the transaction.

• Law Violation
  The extension of credit for merchandise sold or rented or service performed was in violation of law or the rules or regulations of any governmental agency, whether federal, state, local or otherwise.

• Cardholder Legal Claim
  The Cardholder asserts against your merchant processor any claim or defense which the Cardholder may have as a buyer against you.

• Other
  The transaction is otherwise subject to charge back by the Card issuer or Cardholder in accordance with the Card Organization Rules or applicable law.

The following Chargeback Reasons are unlikely to occur for transactions entered via ReceivablesPro, because the system is designed to prevent them:

• A limited purpose business “purchasing card” was accepted without appropriate authorization of the nature of the goods or services purchased (in addition to the transaction amount).

• The sales record is incorrectly completed, incomplete or illegible.

• The transaction was one for which the authorization and verification was not obtained, or a valid authorization code is not correctly and legibly printed on the sales draft.

• The price of the merchandise or services shown on the sales draft differs from the amount shown on the copy of the sales draft delivered to the Cardholder.

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