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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, constantly evolving, and can vary between the different banks and card schemes.

It’s easy to understand how merchants can feel overwhelmed.

We’re going to break 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 schemes, and help you better understand the dispute process from all sides.

What Are Chargeback Rules?

Chargeback Rules

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Chargeback Rules can refer to any part of the extended network of policies used to manage and standardize the chargeback process. These rules can be imposed at the bank, card network, or governmental level.

Cardholders who are victims of fraud or merchant misconduct have the option of filing a customer dispute. This is commonly known as a chargeback. A chargeback basically gives the bank permission to forcibly remove funds from your merchant account and return them to the customer.

At the same time, you have the right to challenge any chargeback you believe is illegitimate. You want to do this whenever possible; not only do disputes cost you money, but the number of chargebacks you receive can affect your ability to accept payments in the future.

The entire chargeback process is managed through a rule set that theoretically covers every circumstance. Time limits, reason codes, fines and fees… are all established types of chargeback rules. In fact, there are literally thousands of pages of chargeback regulations published by the card networks. That doesn’t even cover rules published by other sources like banks and governmental bodies.

Merchant Rules vs. Consumer Rules

Right up front, it’s important to note that there is a double standard at play here.

Yes, there are rules for how and why customers can file disputes. However, those rules are separate from the policies that govern your response to chargebacks as a merchant. This often results in an uneven playing field, with the advantage in the cardholder’s favor.

Consumers, as well as career fraudsters, have found ways to subvert the rules and file illegitimate chargebacks (a practice known as friendly fraud). To illustrate, consider the following example:

Jack makes a purchase online. After the goods arrive, Jack calls his bank and falsely claims he never received them. In most cases, Jack’s issuing bank will take him at his word. After all, he’s their customer. They have an incentive to keep him happy.

It’s easy for cardholders to dispute charges. In contrast, the burden of proof is much higher for you, as a merchant, when resolving payment disputes.

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Chargeback Laws

Some of the mandates categorized as “chargeback rules” are actually laws. In fact, the chargeback system was originally rolled out in response to policy created by the US federal government. The two main legal forces shaping chargeback policy in those early days were:

The Truth in Lending Act

Credit cards were in use by the late 1960s, but they still hadn't gained the widespread acceptance banks were hoping for. 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

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 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

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 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 responsiblility for a transaction dispute.

Learn more about Section 75 claims

Other laws have come along to shape the process over the years, too. For instance, we have the General Data Protection Regulation (GDPR), which 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.

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, or PSD2.

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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

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:


Mastercard users can file a chargeback within 120 days of the date the transaction was processed, for most reason codes. The timeframe for merchants to respond is 45 days, minus time that documents spend in transit between parties.

Learn more about Mastercard chargeback time limits


Visa users can file a chargeback within 120 days of the date the transaction was processed, for most reason codes. Unlike Mastercard, though, Visa chargeback timeframes start the day after the transaction was processed.

Learn more about Visa chargeback time limits

American Express

In the past, Amex cardmembers 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 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.

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, along with 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 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, which is meant to explain the reason for the dispute.

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
Beyond Reason Codes

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Compelling Evidence to Fight Chargebacks

According to the chargeback rules, you have the right to refute any chargeback filed against you. That process includes gathering compelling evidence. The bank won’t just take your word that the chargeback is invalid, though. You must provide proof.

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 is a practice known as friendly fraud, and it can happen by innocent mistake, or due to outright dishonesty. In either case, you could end up wasting a lot of time and energy compiling evidence that has nothing to do with the actual dispute.

Learn more about compelling evidence

Chargeback Rules & Your Chargeback Ratio

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

Breaching the established ratio thresholds can result in penalties from both the card network and the acquirer, but each entity evaluates and addresses risk differently. Many don’t have hard and fast 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 the importance of your Chargeback Ratio

Recent Changes to Network-Mandated Chargeback Rules

Remember: chargeback rules can differ based on many factors, including the card network. In other words, Visa rules are different from Mastercard rules, and both are different from Amex and Discover rules.

All the major networks have chargeback regulation manuals that can exceed 1,000 pages each. These are typically updated semi-annually, but smaller changes and revisions can be implemented whenever the card network deems it necessary.

In addition to ongoing tweaks to the regulations, the networks have made sweeping changes in recent years that affect nearly every aspect of their dispute rules. For example:

April 2018

Visa Claims Resolution

Visa introduced the Visa Claims Resolution (VCR) initiative in 2018. They sought to reduce false chargeback claims, improve the customer experience, and close profit-absorbing loopholes in the dispute process. VCR also revamped Visa’s entire reason code system, simplifying the numbering and eliminating redundancies.

Learn more about Visa Claims Resolution

October 2018

Mastercard Dispute Resolution

The Mastercard Dispute Resolution initiative completely overhauled the Mastercard chargeback process. The network changed to a rules-based system, making the chargeback process more fair, pointed, and responsive. As with VCR, the goal was to clean up outdated, redundant processes that were never designed for eCommerce.

Learn more about Mastercard Dispute Resolution

April 2020

Visa Purchase Return Authorization

For decades, processing card returns simply meant refunding the transaction amount, then submitting that information to the bank. With the Visa Purchase Return Authorization, though, you must seek authorization before processing a return. This is basically the reverse of seeking pre-purchase authorization.

Learn more about the Visa Purchase Return Authorization

April 2020

Mastercard Refund Authorization

The Mastercard Refund Authorization Mandate is another recently introduced rule set. This one is designed to reduce “double dipping,” or obtaining refunds from both the bank and the merchant. In simple terms, the rules shorten the time frame allowed for merchants to refund transactions. This helps ensure that fraudsters don’t have time to request a chargeback after a refund is already in progress.

Learn more about the Mastercard Refund Authorization Mandate

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.

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