Chargeback time limits vary depending on the card network, (such as Visa, Mastercard, or American Express) and the specific terms of your card issuer. Generally speaking, customers can raise a chargeback within 120 days of the transaction date. That said, there are circumstances where the chargeback time limits fluctuate, such as the specific reason code, which we’ll get into later in this article.
What are chargeback time limits and why do they matter for your business?
There are three main reasons why business owners should care about chargeback limits.
One, chargebacks cost your business money. The payment is returned to the customer, so if you’ve already shipped the product or completed the service, you’ve bumped up your costs while losing revenue.
Two, chargebacks come with fees. This means that business owners take a double financial hit – one from the lost revenue and one from the penalty.
Finally, chargebacks affect your reputation with your payment service provider, such as Stripe or Adyen, and ultimately with the card networks, such as Visa or Mastercard. So even if you can afford the refunds and the fines, your ability to grow and do business through credit card networks can be compromised.
Understanding the chargeback time limit can help you deal with all of these issues. Just because a customer files a dispute, doesn’t mean they automatically win. As a business owner, if you can respond in time, you can lower your chargeback rate and keep more of your hard-earned money.
What are the chargeback time limits across the major credit card networks?
Both the customer and you as the business owner (aka the merchant) have a time limit. The customer has a time limit for filing a dispute. You as a business owner have a time limit for responding to that dispute. While there is variability (based on what stage of the dispute process you are in) or the reason code (which we’ll discuss below), the standard time limits are provided in the table below.
Table 1: Time limits for consumers and merchants to file or respond to a dispute.
Keep in mind that these are the standard time limits. Chargeback time limits can also vary depending on the reason code.
What are reason codes and how do they affect chargeback timeframes?
The chart above demonstrates the general time limits for chargebacks. That said, there are two other factors that can change these time limits. One factor is your jurisdiction and its specific laws. Another factor is the reason code.
What are reason codes? Reason codes are a standardized list of reasons why a bank might file a chargeback on behalf of a customer. Each card network has its own set of reason codes, and each reason code comes with its own time limits and its own documentation requirements.
Table 2: Variations in Visa’s chargeback time limits based on reason codes
Table 3: Variations in Mastercard’s chargeback time limits based on reason codes
How can you make managing chargeback deadlines easier?
One of the biggest challenges merchants face is staying on top of chargeback deadlines. One straightforward option is to use manual methods, such as making a note of the chargeback in an Excel sheet and setting calendar reminders. But as your business grows, this becomes more and more unsustainable. Plus, you still have to dedicate time to gathering the necessary documentation.
There are a few best practices for responding to disputes within the required time window. One of the biggest is using a chargeback management solution, which automates the process of alerting you to and helping you prepare a response for disputes. That said, the following tips can help even if you’re using a manual process.
Keep a record of customer interactions to win “friendly fraud” cases
While it’s difficult to win on legitimate fraud causes, there are what’s known as “friendly fraud” cases. This is when consumers buy a product or service, enjoy the benefits, and then report it as fraud, so they don’t have to take on the cost. You can prevent this by interacting with customers face to face or via a virtual call and keeping a record of this interaction. While this may not be economical for some businesses, it is useful for businesses that are selling highly valuable products.
Prove that customers have used your product or service
Keep screenshots or PDF downloads of package tracking data that confirms delivery or signature upon receipt. If you’re selling a subscription service, take screenshots of your user logs to show that a customer has logged in several times and has been enjoying your service.
Write clear product and service descriptions
Ensure that you send your customers clear information about what they are buying, so you can prove that they got what they paid for. This might mean updating your Terms and Conditions to be as clear as possible.
Keep a record of your proof of authorization
One of the most common types of chargebacks are “no authorization” chargebacks. Providing proof of authorization can help you quickly win chargeback disputes. Examples of proof of authorization include signed receipts, address verification system (AVS) matches, CVV confirmations, signed contracts, or an originating IP that matches the customer’s location.
Show proof of your refunds and returns policy
Another best practice is to show proof of your refund/returns policy. This shows the credit card network that the customer agreed to your terms when they made the purchase, and it’s especially helpful in instances where customers simply changed their mind after making an impulse purchase.
Utilize chargeback management software
Another option is to use chargeback management software. Chargeback management software allows you to automate the process of chargeback management. When a dispute comes in, a recovery solution allows you to intelligently select the most suitable evidence to make your case and maximize your chances of winning. It then asks you for the missing information and assembles a world-class representment pack for you.
What are the consequences of missing chargeback deadlines?
As discussed earlier, chargebacks can have an impact on your business’ success in the following ways:
- You lose the dispute, and it becomes almost unwinnable.
- You lose revenue since you’ll lose the money the customer paid even after you put in the work of fulfilling their order.
- You’ll face an increase in your costs due to the chargeback fees.
How can you automate your chargeback management?
One of the smartest business investments you can make is purchasing a chargeback management platform. This helps you automate deadline tracking, and it also helps you prepare your response. Moreover, some chargeback management platforms come with prevention solutions. For instance, a customer may only file a dispute because they want a refund. If you don’t notice this issue, it can turn into a chargeback, which impacts your chargeback ratio and leads to fines. If you have an automated solution, it can help you automatically refund your customers, so that you don’t lose money unnecessarily.
Some solutions also provide automated response preparation. These platforms gather the necessary documentation and then ask you to provide any information that’s missing, increasing your chances of winning disputes.
It’s also a good idea to partner with your payment processors, so they can help you with dispute resolution. In addition to using algorithms and other advanced tools to monitor activity and help business owners avoid fraud, payment processors, such as Stripe, can provide assistance when it comes to handling chargebacks and disputes.
The best offence is a good defence, and implementing a chargeback management strategy is a great defensive strategy that helps you build your business.
If you’re planning on growing, implementing a chargeback management platform can be an enormous help.
You can book a call with a member of the ChargebackStop team here to learn more.
