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What is a Bank Chargeback?

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Cardholder vs. Issuing Bank: Who Files a Chargeback?

Chargebacks are confusing enough for merchants. Why does there have to be such complicated, redundant terminology too?! For example, what is the difference between a bank chargeback and a regular chargeback?

Bank Chargebacks Explained

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Each chargeback filed involves a unique combination of several different entities (including the cardholder, merchant, issuer, acquirer, and card network). Sometimes, all these individuals are directly involved; other times, certain parties are omitted or only indirectly affected.

For example, the cardholder is usually omitted from the process when a bank chargeback is filed.

A bank chargeback is instigated by the issuer after an anomaly is detected in the transaction process. Usually, the cardholder is unaware of the behind-the-scenes activity.

Likewise, certain bank chargebacks can be handled entirely by the acquirer. In these situations, the merchant’s only involvement is paying the chargeback fee. Occasionally, these bank chargebacks can be disputed; however, representment options are usually pretty rare.

The State of Chargebacks 2018

Launched as a way of collecting and analyzing industry findings, the State of Chargebacks survey reflects the experiences of more than one thousand respondents in the card-not-present space. Download to learn the latest insights on fraud and chargeback management.

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Reason Codes Commonly Associated with Bank Chargebacks

Some reason codes are used exclusively for bank chargebacks. For example, a late presentment chargeback, issued when the transaction is processed late, is a bank chargeback. The cardholder isn’t ticking down the days until the predetermined deadline expires; the issuing bank keeps an eye on the time limits.

Other reason codes can be used by either the bank or cardholder to instigate a chargeback. For example, Visa reason code 76 (Incorrect Currency or Transaction Code, or Domestic Transaction Processing Violation) can be used for either a cardholder or bank instigated transaction dispute. The issuer might say the wrong currency code was used, or the cardholder might claim there wasn’t a Dynamic Currency Conversion notification issued.

In contrast, other codes like Visa's reason code 75 (Cardholder Does Not Recognize) are always customer-initiated.

A Chargeback Management Caveat

Merchants looking for a definition of bank chargebacks have come to the right place; we hope to clarify any confusing terminology associated with the chargeback process.

However, the Chargebacks911 blog shouldn’t be used as a definitive guide for all chargeback education and processing guidelines.

Those attempting to handle chargebacks on their own need to carefully review the regulations outlined by MasterCard and Visa, an arduous and time-consuming task. Each chargeback reason code has corresponding information regarding the proper and improper use, rights, limitations, conditions, time limits and more. These chargeback regulations are updated regularly, so in-house chargeback analysts need to routinely check for new information.

Even with a careful review of the networks’ chargeback guidelines, a merchant’s DIY management efforts aren’t necessarily successful and certainly not easy. Our detailed blog article shows just how much is involved in the task of chargeback management.
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The only way to ensure the merchant’s resources are well spent, the chargeback prevention tactics are effective, and the maximum amount of profits are recovered is to get professional chargeback help.

Chargebacks911® uses patent-pending technology and guaranteed ROI to offer the most efficient and cost-effective services to merchants. If you’d like to learn more about how Chargebacks911 can help you manage bank chargebacks and any other form of transaction disputes, let us know.


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