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Chargeback Rules Resources Hub

Chargeback Rules Resources Hub

Learn how chargeback rules differ for merchants and consumers, what laws govern the chargeback process, and what responsibilities, time limits, and fees you might face as a merchant.

The Merchant's Guide to Dispute & Chargeback Rules

Chargeback Rules

If you’re a merchant dealing with chargebacks, it can feel like the cards are stacked against you.

The rules that govern the payment dispute process are difficult to understand. They're also constantly evolving, and can vary between the different banks and card schemes. It’s easy to understand how merchants can feel overwhelmed.

Today, we’re going to help clear things up by breaking down some of the most important chargeback rules, including chargeback fees, time limits, and reason codes. We will provide insight into how these regulations differ between card networks and help you better understand the dispute process from all sides.

What Laws Govern the Chargeback Process?

Let’s start with a basic question: where does the cardholder’s right to file chargebacks come from?

Some of the mandates categorized as “chargeback rules” are actually laws. In fact, the chargeback system was originally rolled out in response to legislation created by the US federal government.

The key pieces of legislation shaping chargeback policy include:

The Truth in Lending Act

The Truth in Lending Act

Credit cards were in use by the late 1960s, but they still hadn't gained the widespread trust for which banks were hoping. The Federal Reserve Board reassured banking customers by introducing The Truth in Lending Act of 1968, or TiLA. This requires lenders to conspicuously provide loan cost information.

Learn more about the role of TiLA in the chargeback process
The Fair Credit Billing Act

The Fair Credit Billing Act

Even after TiLA, consumers still worried about being victimized if their card was lost or stolen. The Fair Credit Billing Act of 1974 addressed these issues by mandating the creation of a process that we now know as a chargeback. Chargebacks strictly limit customer liability in cases of fraud. It also allows cardholders to fight back against deceptive merchant practices.

Learn more about the Fair Credit Billing Act
The Electronic Fund Transfer Act

The Electronic Fund Transfer Act

The Electronic Fund Transfer Act was enacted in 1978. The legislation regulates how banks respond to consumer complaints and sets limits on liability for lost or stolen debit cards. This was implemented in response to new technologies like ATMs, electronic point-of-sale (POS) terminals, and remote banking.

Learn more about the Electronic Fund Transfer Act
The Credit CARD Act of 2009

The Credit CARD Act of 2009

The Credit Card Accountability Responsibility and Disclosure Act of 2009, more commonly known as The Credit CARD Act, was a consumer protection mechanism implemented in the wake of the 2008 financial crisis. The purpose of the CARD Act is to protect consumers against unreasonable interest rates and ensure cardholders are billed fairly.

Learn more about the Credit CARD Act

Those are the most important US laws covering chargebacks. If we look beyond the US, we see other legislative acts that have helped shape chargeback rules and regulations in different jurisdictions:

Section 75

Section 75

Section 75 of the Consumer Credit Act is essentially a British counterpart to the Truth in Lending Act. It differs in two key ways, though: first, there’s no time limit imposed on cardholders to file Section 75 claims, and second, issuers and merchants can share responsibility for a transaction dispute.

Learn more about Section 75 claims
The General Data Protection Regulation

The General Data Protection Regulation

The General Data Protection Regulation, or GDPR, took effect in the EU in 2018. The law limits the way businesses are allowed to use and store cardholder data, with the goal of safeguarding consumer privacy. If you sell goods or services to anyone that resides within, or is a citizen of the EU, then GDPR applies to you.

Learn more about the GDPR
Did You Know?

Currently, The GDPR only affects merchants doing business in the EU. However, other countries and jurisdictions are already exploring similar mandates, like the California Consumer Privacy Act (CCPA).

Legislation governing the payments space can change quickly. New laws and procedures may impact the chargeback process as well, like the revised Payment Service Directive.

Chargeback Reason Codes

The chargeback system was designed as a last resort, only to be used in specific situations. Each of these situations was given an alphanumeric identification code called a chargeback reason code meant to explain the reason for the dispute.

A chargeback reason code is a 2-to-4-digit alphanumeric code provided by the issuing bank involved in a chargeback, which is meant to identify the reason for the dispute. Each of the major card brands, including Visa, Mastercard, and others, have their own system of reason codes. Reason codes are important to help merchants address recurring chargeback triggers, as well as identify frivolous chargebacks, against which the merchant will need to fight back.

Each reason code has its own set of regulations regarding:

  • Proper and improper use of chargebacks
  • Proper representment procedure
  • Filing time limits
  • Acceptable compelling evidence

Learn more about chargeback reason codes

Chargeback Time Limits

Another important set of dispute rules revolves around chargeback time limits.

Chargeback time limits are not legal requirements. Instead, they’re imposed by card networks like Visa and Mastercard. However, they are as strict and immovable as if they were legally mandated.

Each card network has rigid deadlines for all phases of the chargeback response process (commonly known as representment). Missing even one of those deadlines can cause you to lose a reversal, no questions asked.

Learn more about chargeback time limits

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The deadlines can vary based on the reason code, processor, and card scheme. Generally speaking, however, cardholders will have more time available file chargebacks than you have to fight them.

Rule variations from one card network to the next are typically minor. However, just one day’s difference can cause you to miss a deadline. Here’s a breakdown of the time limit rules for several card schemes:

Visa Chargeback Time Limits


In many cases, Visa users can file a chargeback within 120 days of the date the transaction was processed. Again, though, the exact time limit varies by reason code. Unlike Mastercard, though, Visa chargeback timeframes for merchants are just 20 days.

Learn more about Visa chargeback time limits
Mastercard Chargeback Time Limits


In many cases, Mastercard users can file a chargeback within 120 days of the date the transaction was processed. However, the exact time limit varies by reason code. In all situations, the timeframe for merchants to respond to chargebacks is 45 days, minus the time that documents spend in transit between parties.

Learn more about Mastercard chargeback time limits
American Express Chargeback Time Limits

American Express

In the past, Amex card members had no time limits for disputing a charge. The company now has a 120-day limit. However, the start of that timeframe will vary based on the reason code.

Learn more about American Express chargeback time limits
Discover Chargeback Time Limits


Discover typically allows cardholders to file a dispute up to 120 days after the transaction. The merchant, however, has only 20 days to submit their initial response (similar to Visa).

Learn more about Discover chargeback time limits

Chargeback Fines & Fees

Chargebacks are expensive, even under the best of circumstances. You lose the purchase price, the merchandise, and any ancillary costs like shipping and interchange fees. It gets worse, though.

According to general chargeback rules, there is a fee attached to each transaction dispute. This fee is to be paid by you, the merchant, to cover chargeback administration costs. The acquiring bank has a lot of influence in determining the fee amount, as does your processor. The type of goods or services you offer can also affect the price tag and several other factors.

Your merchant processing agreement will outline all applicable chargeback fees. On average, though, you can expect to pay $20 to $50 per chargeback. Merchants labeled “high risk” will usually be charged considerably more. And remember, the fees will apply even if a chargeback is successfully reversed.

Learn more about chargeback fees

Chargeback Ratio Rules & Requirements

Some chargeback rules apply to your chargeback ratio, also known as a chargeback rate.

In simple terms, this is the percentage of chargebacks you receive as compared to your total sales. While we can refer to them as chargeback ratio “rules,” the truth is the decisions in this process can be highly subjective. Each card network measures your chargeback ratio differently, and has different guidelines for what is considered “acceptable.”

Learn more about your chargeback ratio

Each card network also has predetermined thresholds, establishing what should be considered an “excessive” number of chargeback or fraud incidents. Breaching these limits can result in penalties from both the card network and the acquirer. But, as we mentioned, each entity evaluates and addresses risk differently. Most banks don’t have firm mandates regarding when action is taken against your account.

At their discretion, acquirers might tell you to reduce chargebacks on your own. You may be required to enroll in a chargeback monitoring program. In worst-case scenarios, the bank could simply terminate your processing agreement and place you on the MATCH List.

Learn more about chargeback thresholds

Consequences of Violating Chargeback & Fraud Thresholds

Violating fraud and chargeback thresholds set by Visa and Mastercard can lead to serious consequences for merchants.

Both credit card networks have established specific programs to monitor and manage fraud and chargeback activities. Whether or not you’re required to enter one of these programs is determined based on your chargeback-to-transaction ratio (as outlined above).

The consequences of violations are often similar, but with some nuances specific to each network. Here’s a brief breakdown of how these programs work:

Visa Consequences


The Visa Dispute Monitoring Program, or VDMP, is a compliance program administered by Visa for the purpose of controlling merchant chargeback issuances. If a merchant exceeds the monthly chargeback threshold set by Visa, they will be entered into the program.

Learn more about the VDMP

As the name implies, the Visa Fraud Monitoring Program, or VFMP, is a merchant monitoring initiative administered by Visa. The program aims to help merchants manage their criminal fraud risk and, in turn, protect the larger payments environment.

Learn more about the VFMP
Mastercard Consequences


The Excessive Chargeback Merchant program is a dispute compliance scheme created by Mastercard. The program's purpose is to exercise oversight regarding eCommerce merchants and prevent too many chargebacks from occurring on the Mastercard network. This is achieved by imposing penalties on merchants for noncompliance.

Learn more about Mastercard ECM

The Mastercard Excessive Fraud Merchant program is a counterpart program to the ECM. Both are part of the North America Assurance Framework. The basic point of the EFM program is to stop fraud instances resulting from eCommerce transactions. Mastercard explains that this program creates “a more secure ecosystem and provides a better experience for cardholders.”

Learn more about Mastercard EFM

Penalties for Excessive Fraud & Chargebacks

For both Visa and Mastercard, chargeback and fraud thresholds are monitored on a monthly basis. Exceeding them can trigger enrollment in one of these monitoring programs. Consistent violation of these thresholds may also result in:

  • Fines and Penalties: Merchants exceeding MasterCard’s thresholds may face financial penalties, which can escalate with continued non-compliance.
  • Increased Scrutiny and Operational Changes: Merchants identified in these programs may be subject to closer scrutiny, requiring them to implement operational changes to reduce fraud and chargebacks.
  • Mandatory Corrective Measures: The card network may require merchants to take specific actions to reduce their chargeback and fraud levels, which could involve revising processing practices or implementing new fraud prevention technologies.
  • Risk of Account Termination: Repeated violations can lead to the closure of the merchant account by the acquiring bank under MasterCard’s directives.

Rules for Fighting Chargebacks

According to the chargeback rules, you have the right to refute any chargeback filed against you through a process called representment.

The bank won’t just take your word that the chargeback is invalid, though. You must provide proof. As a result, representment requires a lot of work on your end, including gathering compelling evidence to support your claim.

Each network and reason code has its own requirements as to what constitutes compelling evidence. The requirements can be very complex. In many cases, they are not very intuitive or easy to interpret.

Plus, cardholders sometimes provide incorrect information to justify their dispute. This can happen by innocent mistake or due to outright dishonesty. In either case, you could end up wasting a lot of time and energy putting together evidence that has nothing to do with the actual dispute.

Learn more about representment

If representment fails, you do still have some recourse. You can appeal the case to the card network; this is a practice known as arbitration.

Depending on the stakes, you could even appeal to the courts directly; merchants have been known to take cardholders to small claims court to try and recover sales revenue and additional damages. However, this should only be considered under the most extreme circumstances.

Learn more about pursuing legal action

Doing Chargeback Rules Right

Understanding applicable chargeback rules is just the beginning. You must also be able to implement them wherever you’re confronted with a transaction dispute. You have to gather all the evidence and take every step purposefully. Anything less is just preparing to fail.

We know you didn’t go into business to spend all your resources fighting chargebacks, though.

At Chargebacks911®, we understand chargeback rules inside and out. That expertise is the base we rely on to develop and provide end-to-end solutions backed by the industry's only performance-based ROI guarantee.

Ready to forget about chargebacks and get back to the business of making money? Contact Chargebacks911 today for a free ROI analysis. Find out how much more you could be earning by putting your chargeback management in the hands of the experts.


What is the meaning of chargebacks?

A chargeback is a credit or debit card charge that is forcibly reversed by an issuing bank. This typically happens after a cardholder claims a transaction was the result of fraud or abuse.

What is an example of a chargeback?

Chargebacks typically result from a cardholder claiming a transaction was the result of criminal fraud (identity theft, account takeover, etc.). The cardholder may also claim merchant abuse; being billed twice for the same item, for example.

What happens when there is a chargeback?

The transaction amount will be temporarily taken from the merchant’s account and returned to the cardholder. The merchant can either contest or accept the claim.

Does a chargeback hurt your credit?

For cardholders, the official answer is “no.” However, if there is an ongoing pattern of abuse, the merchant may refuse to do future business with you. Your bank could also suspend your account, which would hurt your credit.

Is a chargeback a crime?

No. However, deliberate chargeback fraud may be considered a form of credit card fraud or wire fraud. Legally speaking, that could theoretically result in jail time, although such incidents are rare.

Is a chargeback a refund?

No. Although the two are often used interchangeably, a refund is an equitable exchange; the customer returns the purchase in exchange for a price paid. With a chargeback, however, the merchant is likely to lose the purchase price, the wholesale cost of the item, shipping expenses, and other revenue.

What qualifies for a chargeback?

Consumer chargebacks only apply to cases that involve criminal fraud (unauthorized purchases or identity theft), defective products (orders that come opened, or with parts missing; items that were significantly different advertised), or merchant misbehavior (incorrect or repeated charges on the account, or charges added to the bill after processing).

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