Chargebacks are part of payment processing when the customer questions the charges that appear on the bank account. They are meant to protect consumers against fraudulent activity.

 

Chargebacks occur when the guest disputes a transaction with their card issuer or bank, which triggers the investigation of the charge's legitimacy. During the chargeback process, the cardholder and the merchant try to prove that the other is wrong by providing proof. As the merchant, you have every chance to win the dispute if you use our tips to prevent disputes and provide relevant evidence to challenge the claim.

 

In this article you can learn about:

• The parties included in the dispute process
• The chargeback process
  • Step 1: The cardholder disputes a charge
  • Step 2: The issuing bank reviews the dispute
  • Step 3: The cardholder is reimbursed
  • Step 4: You are notified of the chargeback
  • Step 5: You respond to the dispute
  • Step 6: The card issuer reviews the evidence
  • Step 7: The dispute enters pre-arbitration
• Accounting for chargebacks

 

 

The parties included in the dispute process

There are several parties included in the dispute process: 

• Cardholder: The customer who disputes the transaction.
• Card issuer: The bank that issued the card the customer used for the purchase.
• The card network: Visa or Mastercard. Note: The dispute can involve the card network in some complicated cases.
• Acquirer: The payment gateway provider.
• Merchant: The business selling the product or service whose charge the customer disputes.

Note: The issuing bank or acquirer may charge a dispute process fee. This fee is returned to you if the case is won and stays with the issuing bank or acquirer if the case is lost.

 

The chargeback process

Learn more about what happens before, during, and after a dispute by following these steps:

 

Step 1: The cardholder disputes a charge

The cardholder alerts their issuing bank about suspicious payments for the following reasons:

• The cardholder does not recognize the charge. If the card was lost or stolen, another person could have used the card to make a fraudulent purchase.
• The cardholder paid with the wrong card.
• The cardholder failed to cancel their reservation per your policy and does not want to pay the cancellation fee.
• The cardholder stayed with you as intended but did not want to pay for their stay because they were unsatisfied.

 

Step 2: The issuing bank reviews the dispute

The issuing bank reviews the dispute and determines whether it is valid. The bank then decides whether to,

• reject the cardholder's supporting evidence if it is weak or unreliable.
• accept the dispute and forward it to the acquirer via the card network.

 

Note: This process is different for American Express. When a chargeback is related to fraud, American Express favors its card members and issues an immediate chargeback without inquiry.

 

Step 3: The cardholder is reimbursed

The card network sends the chargeback to Mews.

• If you use the Adyen payment gateway, you retain the funds until the cardholder wins the dispute.
• If you use Stripe, Mews reimburses the cardholder for the disputed amount before the card issuer rules on the case. If you win the dispute later, Mews returns the money to your account.

 

Note: If the chargeback amount is different from the transaction amount, it could be because:

• The card network creates the chargeback in a different currency than the original transaction.
• The customer believes you billed for the wrong amount.
• The customer received a partial refund but is looking for a full refund.

 

Step 4: You are notified of the chargeback

The card network passes the dispute to your payment processor, for example, Stripe, and notifies Mews. Mews then sends you an email informing you of the chargeback.

 Note: If you want to,

• change the email address to which Mews sends chargeback notifications.
• automatically receive chargeback tasks on the Dashboard every time you receive a chargeback.

Access the Mews Digital Assistant in Mews Operations to create a support ticket.

 

Step 5: You respond to the dispute

When Mews notifies you about the chargeback dispute, you need to respond within a specific number of days. The time limit to respond begins as soon as you have received notice of the dispute and can be anywhere from 10-39 days, depending on the processor. 

Read our guide on how to respond to a chargeback for help providing evidence.

• If you accept the chargeback or do not respond within the time limit, the process awards the cardholder the chargeback.
• If you want to object to the chargeback, you need to provide compelling evidence to prove your claim within the time limit specified by the processor. You need to send the evidence to Mews first, and then Mews delivers it to the payment gateway provider on your behalf.

 

Step 6: The card issuer reviews the evidence

If you object to the chargeback, Mews sends your evidence to the payment gateway provider. It then arrives at the credit card issuer for review. Only the issuer is responsible for reviewing the evidence and deciding in favor of you or the cardholder. This process typically takes around 60-75 days.

• If the issuer rules in favor of the cardholder, the evidence is insufficient to disprove the dispute, and the cardholder keeps the reimbursement.
• If the issuer rules in your favor, the processor informs the cardholder that they declined the chargeback and returns the funds taken from your account about a week later. However, the cardholder can contest the dispute's outcome by filing a second chargeback, also called an "arbitration chargeback."

Banks keep their internal review processes confidential, so you may not understand why the issuer resolved the dispute the way they did.

 

Step 7: The dispute enters pre-arbitration

If the cardholder files a second dispute, the chargeback enters the pre-arbitration stage and then arbitration. It is challenging to win a second chargeback dispute, so Mews recommends contacting the cardholder directly to resolve the dispute.

Note: Mastercard holders can initiate a second chargeback within 45-47 days from when you supplied them with your evidence. In this case, funds are taken from your account after being reversed, and you cannot upload any further documents.

 

Accounting for chargebacks

Mews recommends leaving chargebacks in the Accounting Ledger until the card issuer resolves the dispute. If the card issuer resolves the dispute in your favor, Mews offsets the chargeback by the sum returned to you.

 

 

You can learn more about chargebacks and fraudulent charges and how can you use Mews to prevent them here.