Square Dispute ProcessWhat Happens From the Moment a Customer Calls Their Bank
In a Nutshell
When a customer disputes a Square transaction, the issuing bank is the party that initiates the process. Square places an immediate hold on the disputed funds, and you have seven days to either accept or challenge the claim. Square’s Dispute Resolution Team routes your evidence to the issuing bank, who makes the final ruling. Understanding who controls what at each stage is the key to responding effectively.
Square Dispute Process: How Square Fits Into the Chargeback Chain
A traditional payment processor would operate at one layer of the payments stack. They handle the technical mechanics of running a transaction, so their job would be limited to transmitting data and payment information between you and your bank.
Square is different; in practical terms, they serve as both your processor and your acquirer (the financial institution that holds your funds). That dual role is why Square disputes look slightly different from disputes processed through a traditional merchant account.
Square Disputes
Have questions about how chargebacks work on the Square platform? Start here. This guide covers everything Square merchants need to know about disputes, including how the process works, time limits, fees, tools, and how to fight back.
What Happens When a Square Dispute Gets Filed
The moment a dispute is initiated, Square puts a hold on the disputed funds from your account. You’ll receive a notification, which initiates a seven-day window in which you can respond.
Now, looking at the other end of the dispute — when a cardholder believes a charge is fraudulent, unauthorized, or otherwise problematic, they contact their issuing bank. The issuer initiates the chargeback, debits Square for the disputed amount, and notifies them of the claim. Square’s job is to receive the claim and notify you, so that you can determine how you want to proceed.
Here’s the basic sequence of events once a cardholder files a dispute on a transaction processed through Square:
The Issuing Bank Initiates the Chargeback
The bank debits Square’s account for the disputed amount and sends a formal dispute notification. This will include a reason code, explaining why the cardholder disputed the chargeback. The issuer may also attach supporting documentation for the cardholder’s claim.
Square Places a Hold on the Funds
If the balance in your Square account covers the disputed amount, then Square will put a hold on that amount. If your balance is insufficient, Square debits your linked bank account for the difference. Either way, the funds are gonna be held in limbo until the dispute gets resolved.
Square Notifies You About the Chargeback
You’ll get an email notification about the dispute. You can then view the Information Request Form including the stated reason for the dispute, the documentation the bank requires, and your response deadline, from your Square Dashboard (go to Orders & Payments > Disputes).
You Choose Your Response
You have two options: accept the dispute, or challenge it by submitting evidence. You have seven days from the notification to act. If you want to accept the dispute, simply select No on the Information Request Form. If you want to fight it, then select Yes on the form and answer the questions provided.
Square serves as what’s called a merchant of record for merchants using their services. This means they provide a lot more services to their merchants than a standard processor.
The Square Dispute Response Process
When you challenge a dispute, you submit evidence through Square’s Disputes Dashboard, Square routes it to the issuing bank, and the bank issues a ruling—a process that can take up to 90 days. Once the bank rules, Square does not pursue further action on your behalf.
Now, just because you can fight a Square chargeback, doesn’t always mean you should.
Accepting a dispute costs less than building a response that’s unlikely to win. The decision of how to respond should be based on factors like the transaction amount, evidence quality, and the reason code driving the dispute. But, we’ll get into all of that in more detail in the “How to Respond to Square Disputes” chapter.
For now, just know that disputes can end at step four outlined above, or they can proceed to the next step, as I’ll cover below. If you decide to challenge a dispute, here’s how it unfolds:
Compile the Documentation You Need
Examine the customer’s claim, then pull up all relevant transaction records to which you have access. I’m talking shipping and delivery information, form submissions, payment data, copies of policies that the cardholder agreed to… basically anything that is relevant, and which contradicts the claim being made.
Submit Your Evidence
Using the same Information Request Form I talked about in Steps 3 and 4 to upload all the documentation you gathered that’s relevant to the dispute. You have seven days from notification to complete this step.
Square Reviews & Routes Your Response
Square has a dedicated Dispute Resolution Team who will review all your documentation, confirm that your submission meets card network requirements, and then route everything to the cardholder’s bank.
The Bank Evaluates & Makes a Ruling
The issuing bank reviews the cardholder’s claim alongside your evidence and issues a ruling. This can usually be done in less than 30 days, but can take up to 90 days in more complex cases.
Square Notifies You of the Outcome
If you win, Square releases the held funds. If the bank rules for the cardholder, the customer receives their refund. There’s no recourse if you disagree with the bank’s decision; their call is final.
Once the issuing bank makes a ruling, Square considers the matter closed. The company does not pursue pre-arbitration or arbitration on behalf of their merchants.
What About Cash App Pay Disputes?
Fraud disputes on Cash App Pay transactions are fully covered by Square, with no cost or action required from the merchant. Non-fraud disputes follow the standard Square process.
Now, not all merchants engage with the Square ecosystem in the same way.
Square merchants can accept payments via Cash App Pay, Square’s integration with the Cash App platform. When a dispute arises from a Cash App Pay transaction, how it’s handled depends on the dispute type.
Fraud Disputes
Non-Fraud Disputes
As of April 2024, Cash App Pay is available only to select businesses based in the US. International businesses, partnerships, multimember LLCs, and large corporations are not longer eligible.
