The Chargeback Life Cycle: Start to Finish in 14 Steps
Ever wonder why chargebacks are always such a pain?
Why do they cost so much? Why are there so many moving goalposts. And, why do they take so long to resolve?!
The average chargeback life cycle is dependent on—and exacerbated by—several factors that aren’t always in concert. In this article, we’ll explain the full chargeback life cycle, breaking it down into 15 key steps. We’ll discuss some of the complicating factors that arise along the way, and provide you with a couple of tips to help simplify the process.
Recommended reading
- Debit Card Chargebacks: Everything You Need to Know in 2024
- Provisional Credits: Here’s Everything You Need to Know.
- Here are the 7 Valid Reasons to Dispute a Charge
- A Step-By-Step Guide to the Chargeback Process in 2024
- Provisional Credit Reversal: Steps to Recover Lost Revenue
- Chargeback Reasons: 25 Reasons Why Customers File Disputes
What is the Chargeback Life Cycle?
- Chargeback Life Cycle
The chargeback life cycle describes the chargeback process from start to finish. This includes the parties involved and the wait times and responses imposed by each for the duration of that chargeback ‘life span.’
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When the chargeback life cycle works as intended, it generally involves three key parties: the issuer, the acquirer, and the merchant. The cardholder can also be involved if that person initiated the dispute.
In the case of a bank chargeback, the issuer can file a dispute on the cardholder’s behalf without even notifying the person first. But, these are less common. So, instead we’ll focus on a standard cardholder dispute.
Your Step-by-Step Guide to the Chargeback Life Cycle
The chargeback life cycle seems like a pretty simple, straightforward process. If the customer makes a purchase and disputes it, it’s your turn to fight the dispute. In the end, one side wins while the other loses…right?
Unfortunately, it’s not that easy.
Depending on the situation, the chargeback cycle can take a lot of unexpected twists and turns before a dispute is finally settled. In the most basic form, a chargeback involves the following steps:
Navigating the Chargeback Cycle is an Uphill Battle
The chargeback process tends to favor cardholders over merchants. This is due to a number of factors, including cardholder expectations, the desire to protect consumers, and a lack of insight about dispute data.
Resolving chargebacks is a painful, costly and time consuming process. But… why?
Arguably the primary issue is that the chargeback life cycle is deeply flawed. Although the chargeback process appears to be comprehensive, objective, and systematic, it actually relies on biased human arbiters and subjective reasoning.
Compounding this issue is the fact that cardholders themselves often try to undermine the process itself. Specifically:
There are countless variables in the chargeback process, too. Before you respond to a chargeback, you need to consider:
- Do you have grounds to fight back?
- What evidence and/or documentation is available?
- How much time has passed since the original transaction?
- Does it relate to a single purchase or multiple transactions?
- Which card brand is involved?
- How will this dispute affect your chargeback rate?
Worse, chargeback fees alone account for roughly 27% of costs incurred by merchants while fighting disputes. Issuers, acquirers, and payment networks may also tack on “high-risk” merchant fees and levy additional penalties. This means that merchants have to be selective about fighting only chargebacks they know they can win.
Recent & Upcoming Changes to the Chargeback Life Cycle
Changes have been — and are continuing to be — made to the chargeback process. For example, Mastercom Collaboration, Compelling Evidence 3.0, and an overhaul of Visa dispute and fraud monitoring programs.
Luckily, payment card networks are developing new ways to address challenges in the existing chargeback cycle.
Work Smarter, Not Harder
The complete chargeback life cycle, from filing to resolution, can take weeks or even months.
If you’re a merchant, your revenue will be tied up during that entire period in a costly, complicated, and time-consuming process. You can’t focus on growing your business while you’re occupied with winning back the revenue you’ve already got. And, approaching a dispute without an absolute understanding of chargebacks—or the proper tools and strategies—can actually increase your risk.
We’re talking about complex rules, confusing timetables, and a limited chance of success. It’s no wonder so many merchants think that fighting chargebacks isn’t even worth the time and resources it requires.
That being said, there’s too much at stake to give up. Instead, why not let the experts handle it?
The Chargebacks911® team is here to help. No other providers offer the kind of fully-managed, end-to-end coverage we deliver. It’s no wonder that Chargebacks911 has been chosen as the “Best Chargeback Management Solution” for three years in a row.
Have additional questions about the chargeback life cycle? Want to know more about how easy the process could be with Chargebacks911 in your corner? Click below and talk to one of our dispute experts today.
FAQs
What is the chargeback life cycle?
The chargeback life cycle describes the steps involved in the chargeback process. The cycle begins when a cardholder initiates a chargeback with their issuing bank. When this happens, the disputed transaction will be reversed, and the merchant can either accept the chargeback or fight it through the representation chargeback.
If a merchant is successful in their rebuttal, the chargeback may be reversed in their favor. In some cases, issuing banks may file a “second chargeback,” which will push a chargeback into the pre-arbitration stage. Issuers and merchants who reach a deadlock at this stage may head to arbitration, where a payment network will make a final, binding decision.
What is the validity period of a chargeback?
The validity period of a chargeback refers to the timeframe during which a cardholder can initiate a chargeback. Validity periods depend on the payment processor and the transaction type, but are typically 120 days in length. Some issuing banks may require that cardholders file chargebacks within shorter timelines (e.g. 30, 45, or 60 days of the transaction date).
What is the flow of chargeback process?
The flow of a chargeback process begins when a cardholder files a dispute with their issuing bank. The merchant is then notified and can either accept or reject the chargeback. If the merchant rejects the chargeback, they must present counterevidence to the issuing bank, who may reverse the chargeback or rule against the merchant. In the latter case, a chargeback may enter pre-arbitration or arbitration.
How long do chargebacks last?
The duration of a chargeback case depends on the reason code, as well as the issuing bank and payment card network involved. Typically, chargeback cases are resolved within 30 to 60 days, though cases appealed through arbitration take longer.
Can you do a chargeback after 2 years?
In some cases, but not typically. Although you typically have up to 120 days following the transaction date to file a chargeback, your issuing bank may impose shorter (e.g. 30, 45, or 60 day) timelines.
