The process of managing chargebacks can vary significantly by card. This guide provides an overview of how chargebacks with Discover are different, what the process involves, and how to handle fees, time frames, fees, and tools to prevent future disputes.
For a complete guide on managing a merchant case in Discover’s Dispute System, refer to the Discover Network Dispute System for Merchants.
Related: Chargeback Fraud 101: What Businesses Need to Know.
What Differentiates Discover Chargebacks?
Discover operates as both an issuing bank and a card network. This is similar to American Express but unlike Visa or Mastercard, which are credit card networks but not issuers. As the issuer, Discover has the majority of the transaction information. While this makes the dispute process straightforward, it can also make it harder to successfully contest chargebacks.
Discover also uses retrieval requests when there isn’t enough evidence for a chargeback, which is not part of the process for Mastercard and Visa. Retrieval requests are requests for transaction data from the merchant to decide whether or not to issue a chargeback.
Retrieval requests are friendlier to merchants, since they present an opportunity to resolve the dispute without a costly chargeback process. However, if the retrieval request is unsuccessful or merchants don’t respond within the time limit, Discover will proceed with a chargeback.
Related: Issuer vs Acquirer vs Card Network: What’s the Difference?
Discover Chargeback Process Flow
Cardholders initiate a chargeback when they disagree with a charge on their account.
The most common reasons for disputes are:
- Cardholder doesn't recall purchase
- Billing error
- Canceled or not received product/service
- Returns
The dispute process is as follows:
- Cardholders questions a chargesome text
- The chargeback is issued if Discover finds the claim legitimatesome text
- The dispute is resolved
- The merchant appeals
- The merchant receives a ticket retrieval request (TRR) if additional information is needed
- The chargeback is issued if Discover finds the claim legitimatesome text
- After a TRR or merchant appeal, with merchant submitting requested information: some text
- Discover decides in favor of the card member, and the chargeback stands
- Discover decides in favor of the merchant, and the chargeback is reversed
- If a TRR response is inconclusive and a chargeback is filed:some text
- Discover escalates the dispute to arbitration
- Merchants will have to submit additional documentation through the representment process
- Discover rules on the arbitration after receiving documentation from both parties
Discover prohibits contact between merchants and cardholders regarding Discover card chargebacks.
Related: Chargeback Representment: The Entire Process Explained
Related: How Does the Bank (Credit Card) Dispute Process Work?
Chargeback Time Frame
All Discover dispute time limits operate on calendar days rather than business days, meaning that weekends and holidays are counted.
Also note that time limits are often shorter than what Discover states, as they are subject to internal timelines for any other processors used.
The time frame is as follows:
- Cardholders have 120 days from the transaction date to file a chargeback dispute. Discover may accept claims filed outside this window at their discretion.
- Merchants have 5 calendar days to respond to a ticket retrieval request (TRR).
- Merchants have an additional 20 calendars to provide evidence for subsequent requests. Given that this timeframe is shorter than most networks, it is critical that they respond in a timely manner.
- Merchants have up to 30 calendar days to contest the claim during arbitration if the dispute is still unresolved after the TRR.
- Discover rules on the arbitration within 15 business days once both parties submit their evidence.
- Merchants are given 30 days to comply if Discover rules in favor of the cardholder.
Chargeback Reason Codes
Discover chargeback reason codes are alphanumeric codes to explain why a chargeback occurred. Reason codes are linked to different kinds of compelling evidence, around which merchants must build a case to win a reversal.
There are a limited number of accepted reasons for disputes to be filed:
Service Dispute
- 05 - Good Faith Investigation Chargeback
- AA: Does Not Recognize
- AP: Recurring Payments
- AW: Altered Amount
- CD: Credit/Debit Posted Incorrectly
- DP: Duplicate Processing
- NF: Non-Receipt of Cash from an ATM
- PM: Paid by Other Means
- RG: Non-Receipt of Goods, Services, or Cash
- RM: Cardholder Disputes the Quality of Goods or Services
- RN2: Credit Not Processed
Fraud
- UA01 - Fraud: Card Present Transaction
- UA02 - Fraud: Card Not Present Transaction
- UA05 - Fraud: Chip Card Counterfeit Transaction
- UA06 - Fraud: Chip and PIN Transaction
Processing Error
- AT: Authorization Noncompliance
- IN: Invalid Card Number
- LP: Late Presentation
If a cardholder chargeback matches any of the reason codes, the onus lies on the merchant to disprove the claim. Merchants can dispute a chargeback by submitting evidence once Discover makes a ticket retrieval request.
Chargeback Fees
If merchants lose the chargeback dispute, customers receive the disputed funds, and merchants are subject to chargeback fees on top of lost revenue.
While Discover does not make specific merchant chargeback fees available on its website or Discover Network Dispute System for Merchants (DNDS) manual, available guidelines suggest fees ranging from $25 to $100, depending on the case and whether a merchant is considered high-risk.
Preventing Chargebacks
Best Practices
- Post clear and visible cancellation, return and refund policies prior to the checkout process
- Make sure customer service contact information is easy to find and access
- Always ask for Card Identification Number (four-digit security code on the card face) for card-not-present transactions
- Use Automated Address Verification service (the American Express version of AVS) to validate cardholder information
- Process credits immediately when necessary, and notify cardholders of refund statuses, since they are better than chargebacks
Related: Chargeback Prevention Guide
Discover Fraud Prevention Tools
- Discover Network Dispute System (DNDS): Platform for authorized users to look up transactions and cardholder details to find other data for claims and upload additional evidence
- Discover ProtectBuy: Branded 3-D Secure customer authentication to verify card member identity at the time of purchase and flag high risk transactions
- Discovery Verify+: Identifies high-risk transactions prior to fulfillment, with additional fraud protection to minimize shopping cart abandonment
- Discover Enhanced Decisioning: no-caust fraud management solution with additional card member data for better decisioning
- Fraud Alerts Standard: free online platform providing US businesses with early warning and immediate notification of fraudulent activity
Looking Forward
Discover’s chargeback fees and timeframes are generally difficult to pin down. Your best bet is to refer to your Merchant Agreement to find this information.
You likely have questions about this article or perhaps other chargeback matters.
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FAQ
When do chargebacks commonly occur?
Disputes commonly occur when card members think they were charged twice, disagree with the amount, never received the product(s) or received defective item(s), or do not recognize the charge on their billing statement. In cases such as these, users can request a chargeback from their card issuer, which in the case of Discover is also acting as the issuing bank.
Related: What is a Chargeback and How Is It Avoided?
What is a ticket retrieval request?
This is what Discover calls the request made to merchants for more evidence. Ticket retrieval requests help determine whether the chargeback was legitimate.
What is the chargeback time limit for Discover?
The chargeback time limit is 120 days from the date of the original transaction for cardholders.
The chargeback time limit is 5 calendar days (as distinct from business days) for merchants to respond to ticket retrieval requests (TRR).
If the TRR response is inconclusive, Discover allows a chargeback time limit of up to 30 calendar days for merchants to contest the claim.
How much is the Discover chargeback fee?
The fee can range from $25 to $100, depending on the case and whether a merchant is considered high-risk.
What happens if a merchant receives too many chargebacks?
While there is no specific chargeback threshold, the rule of thumb for Discover is over 1%. Discover will place merchants on a monitoring period, and if they are unable to bring their chargeback rate down, their account will likely be terminated.
In addition, the merchant may be placed on a Terminated Merchant File (TMF), which will make it difficult to get approved with another acquirer.