As you navigate through the chargeback process, it’s important that you understand exactly how it works — and this includes the rules that come with it.

Just like any highly regulated process in this world, rules surround everything from time limits to reason codes, fines, fees, penalties, and more.

As you navigate through these rules, you’ll notice that they are quite complex and ever-evolving. If you’ve ever found yourself deciding not to challenge a chargeback you know to be wrong, most likely it’s because the rules can seem a bit daunting.

Before we dive into the rules and regulations, it’s vital that you understand how the chargeback process works:

#1 – The cardholder contacts the bank to dispute a transaction or the bank detects an anomaly and returns the transaction to the acquiring bank for review.

#2 – The bank will review the chargeback and decide if it should be voided or if indeed the chargeback is warranted. As this review process is occuring, the consumer will receive a temporary refund. At this time, funds are removed from the merchant’s bank until things can be 100% resolved.

#3 – A merchant has the power to argue against the chargeback and must provide evidence that the chargeback was reported wrongly. If by chance the merchant doesn’t have evidence, the chargeback will stand as legitimate and the money will be placed back in the merchant’s account.

#4 – In the case that a merchant submits evidence but the issuer wants to see more evidence, it will instigate a pre-arbitration case. This will lead to the issuer either weighing in favor of the customer or the merchant.

It all depends on the evidence submitted.

Reason Codes Also Play a Big Role in the Chargeback Process

When a chargeback is submitted, it must include a “reason code,” which explains why the transaction was disputed. In order to fight a chargeback effectively, a chargeback code is a must, as it reveals why a customer was upset and felt that they needed to fight the issue.

Each reason code comes with its own set of regulations surrounding the following areas:

a) Filing time limits

b) Proper and improper use

c) Acceptable compelling evidence

d) The representment process.

Each credit provider has their own set of reason codes. For example, Visa’s codes look something like this:



10.1 – EMV Liability Shift Counterfeit Fraud

10.2 –  EMV Liability Shift Non-Counterfeit Fraud

10.3 – Other Fraud: Card-Present Environment/Condition

10.4 – Other Fraud: Card-Absent Environment/Condition

10.5 – Visa Fraud Monitoring program

 And the list goes on and on…

There are also fines, fees, and penalties you need to be aware of surrounding chargebacks.



When a chargeback is initiated, there are chargeback ratios — or the percentage of chargebacks a merchant received in relationship to total sales. Merchants can’t cross these thresholds, and if they do, they are penalized.

If chargebacks become a regular problem, networks have the right to require that merchants enroll in a chargeback monitoring program. Or they may demand a risk mitigation plan.

When in this situation, a merchant must reduce chargebacks or risk being put on the MATCH list, which prohibits them from obtaining a traditional processing agreement for five or more years.

Fees & Fines

Chargeback rules state that each transaction dispute comes with a fee that a merchant must pay. These fees are determined by the acquiring bank. Fees can depend on the amount being charged back and several other factors.

Each merchant processing agreement outlines all chargeback fees, which normally range between $20 and $50 per chargeback. If for any reason a merchant is labeled “high risk,” chargeback fees can be much higher.


Network-Mandated Chargeback Rules

Each credit card network chargeback rules can vary per card network. For example, Visa regulations are now quite different from other networks. If you have questions surrounding them, you can visit their online manuals, which are usually updated a couple times per year.

We strongly suggest that merchants carefully study each network’s guidelines and read updates. While it’s not the most exciting reading material, these manuals are an important part of protecting against lost revenue.

Last Words

We understand that the chargeback process can be frustrating, but it’s important that you dive in as much as you can to understand how it works and how you can make the rules and regulations best work for your business.

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