The chargeback process is a confusing subject, however a basic understanding of the workflow is important. If you are familiar with how the process works, you can manage chargebacks with high ROI. But if you don’t fully grasp how a dispute unfolds, your bottom line could take a hit.
Note
The chargeback process differs slightly for some Visa® disputes.
In any chargeback situation, there are five main people involved:
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The cardholder is a consumer who has been issued a credit or debit card. Unless the transaction is fraudulent, the cardholder is the person who makes the purchase.
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The issuer is the cardholder’s bank.
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You, the merchant, are a business that has been approved to process credit and debit card purchases.
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The acquirer is the merchant’s bank.
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The card brand (Mastercard®, Visa®, etc.) acts as the go-between, facilitating messages and activity between the issuer and acquirer.
These people have different roles to play at each stage of the chargeback process.
The chargeback process can be broken down into five different stages, all of which are made up of various tasks that must be completed before the case can advance to the next phase.
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Chargeback
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Chargeback Response
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Pre-Arbitration
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Pre-Arbitration Response
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Arbitration
NOTE: Usually, the chargeback process is finished after one or two phases. Occasionally, a case will advance through all five stages (this is extremely rare for American Express® and Discover® disputes).
During the first phase of the chargeback process, the cardholder initiates the dispute and you are notified.
If you decide to respond to the chargeback — which we usually recommend — the process advances to the next stage.
When you respond to a chargeback, the case is sent back to the issuer for review. Based on the information provided, the issuer decides who is responsible for payment.
If the issuer decides in your favor, the cardholder might choose to dispute the transaction a second time which would advance the case to the next phase of the chargeback process.
If the cardholder isn’t satisfied with the issuer’s verdict, the transaction is disputed again (this second dispute is technically referred to as pre-arbitration).
Again, you have a decision to make: accept the loss or continue fighting.
NOTE: We encourage you to accept liability if a case advances to pre-arbitration. We do not recommend that you continue fighting.
The reason is because we help you create the most compelling dispute response possible with all the evidence that is available — we don’t hold any information back. So unfortunately, if you respond a second time, your argument won’t be any more compelling than it was the first time. This means a pre-arbitration response simply increases your costs without increasing your odds of winning.
Instead of using your resources to fight pre-arbitration cases, spend that time analyzing your chargeback data. What are the most common characteristics of winning responses? What elements are missing from responses that result in a loss or pre-arbitration? How can you optimize your response strategy so you win more and lose less?
If you choose to keep fighting, you’ll send a pre-arbitration response to the issuer.
Failing to accept liability during pre-arbitration means the issuer has the option to advance the case to arbitration.
Arbitration is the final phase in the chargeback process. The card brand assigns liability and the case is closed.
NOTE: The losing party must pay all arbitration costs and fees — which is usually a minimum of $520 per dispute — so think carefully about advancing a case to this stage. During arbitration, the card brand will only review the evidence you provided in the chargeback response. Anything shared in a pre-arbitration response will not be considered. So again, if your argument wasn’t compelling the first time, it might not be persuasive enough at a later stage.