The chargeback process has specific time limits, established by the major card networks, including Visa, Mastercard, American Express, and Discover. These limits start with with the submission of chargeback disputes by the cardholder and may vary depending on the reason for the chargeback.
Merchants need to know the range of time needed to respond to avoid being held responsible for the chargeback amount. On the other hand, cardholders who miss the time limits may lose their right to dispute the charge and could be responsible for the full amount. It’s critical for both merchants and consumers to understand these time limits associated with chargebacks in order to avoid any issues.
Chargeback Time Limits Overview
In most cases, the chargeback time limit is 120 days from the transaction or delivery date, whichever is later. However, some card networks have shorter limits, such as 60 days from the transaction date. Different card networks have their own specific chargeback time limits and policies. For instance, Visa provides a chargeback time limit of 120 days from the transaction date in case of fraud, while it is 180 days from the transaction date for non-fraud disputes. On the other hand, Mastercard's chargeback time limit for fraud is also 120 days from the transaction date, but for non-fraud disputes, it is 540 days from the transaction date.
It's worth noting that there are certain situations where the standard time limits for chargebacks don't apply. For instance, if the cardholder didn't authorize or know about a transaction, there is no specific time limit for disputing it. Moreover, if the merchant fails to provide the cardholder with a receipt or provides an incorrect one, the time limit for chargebacks could be extended.
It's crucial for merchants to be aware of these chargeback time limits and to maintain accurate records of all transactions and receipts. Not responding to a chargeback within the set timeframe could lead to automatic approval of the chargeback in favor of the cardholder.
Deadlines and Timeframes
Understanding chargeback time limits is crucial for merchants and financial institutions to ensure they don't miss any deadlines and lose their rights to dispute a chargeback. This section aims to provide a comprehensive overview of how to calculate deadlines, extensions, and accelerations in the chargeback process.
Extensions and Accelerations
It is not uncommon for merchants and financial institutions to request an extension or acceleration of the chargeback time limit. An extension can be granted if there is a delay in receiving evidence or an ongoing investigation occurs. An acceleration can be given if the cardholder's bank determines that the dispute is urgent.
It is important to note that the payment network's rules govern extensions and accelerations, which can vary depending on the network. Merchants and financial institutions must abide by the rules and provide a valid reason for requesting an extension or acceleration.
Merchants and financial institutions must understand chargeback time limits to protect their rights in the dispute process. To avoid losing the dispute, they must calculate deadlines, request extensions, and accelerate in accordance with the payment network's rules.
Industry-Specific Time Limits
Chargeback time limits vary depending on the industry, payment processor, and payment method used.
Merchants must be aware of the chargeback time limits set by their payment processors. For instance, PayPal's chargeback time limit is 180 days from the transaction date. If a customer disputes a transaction after this period, PayPal won't be able to process the chargeback. Merchants must remember this and be ready to provide evidence to dispute any chargebacks that fall within this time frame. To avoid any potential disputes, taking necessary action within these time frames is crucial.
Additional Considerations
Merchants must consider several crucial considerations when handling chargebacks. These include currency and amount discrepancies, recurring transactions, ATM and technical disputes, and account numbers not on file. Knowing these factors can help merchants avoid potential risks and mitigate losses.
Discrepancies may arise when processing transactions involving different currencies and amounts. These discrepancies may arise due to variations in exchange rates. To avoid chargebacks, merchants should be aware of such potential discrepancies and take necessary steps to reduce the risks associated with them.
When dealing with recurring transactions, it is crucial to ensure that the customer has clear and undeniable access to and understands the merchant’s terms of service. Failing to do so can lead to chargebacks and other disputes. It is especially important to clearly communicate the details of the recurring transaction and obtain the customer's consent before processing any payments. If not, you can expect to encounter a flurry of chargebacks.
Pre-Arbitration Chargebacks
In some cases, a cardholder might choose to escalate a dispute to pre-arbitration or arbitration, which are more formal procedures than a standard chargeback. Pre-arbitration chargebacks are filed when the cardholder is dissatisfied with the outcome of a chargeback and wants to dispute the transaction further. Arbitration chargebacks are filed when the cardholder and merchant cannot reach a resolution during pre-arbitration.
Pre-arbitration and arbitration chargebacks have time limits that are different from standard chargebacks. The issuer has 45 calendar days to respond to a pre-arbitration chargeback, and the merchant has 30 days to respond to an arbitration chargeback. Merchants need to be aware of these time limits and respond promptly to avoid losing the dispute.
Merchant's Perspective
Merchants can mitigate the above risks by using chargeback mitigation solutions like Chargeblast. Chargeblast sends pre-dispute alerts (48 - 72 hour heads-up) to merchants so the merchants can simply refund the transaction and end the chargeback process before it ever reaches their payment processor. By using Chargeblast, merchants are able to maintain a chargeback rate near 0% and not be at risk of losing their payment processing accounts. Thousands of merchants have trusted >$2bn in transactions with Chargeblast.
