Learn When Customers Can—and CAN’T—File a Dispute

The Credit Card Dispute Process Guide for Cardholders & Merchants

Credit Card Dispute Process: A 2025 Procedural Guide for Merchants

Imagine this: You’re going through your accounts, preparing to pay vendor invoices and other such tasks. But, while looking at the books you suddenly realize you have less money in the bank than you thought… a lot less.

Your first thought is, “What the heck happened?!”

A closer inspection uncovers the truth: a customer filed a dispute, and the bank withdrew funds from your business without sending you any advance notice. The buyer never contacted you about a refund, so now you’re looking at a lost sale, an unhappy customer, and the real possibility of a permanent revenue loss.

It’s in your best interest to learn all you can about the dispute process. But, how does a credit card dispute work, though?

In this guide, I’ll explain how the credit card dispute process works. Together, we’ll explore how chargebacks affect each stakeholder, and what you can do to resolve disputes as quickly and easily as possible.

Whether you're already familiar with disputes, or are investigating things for the first time, I’ve got a few tips and best practices you should consider at every stage. I’ll also provide suggestions and tips for prevention at each step in the process that might help you prevent, or at least win a credit card dispute.

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Common QuestionWhat is a credit card dispute?A credit card dispute, also known as a credit card chargeback, occurs when a customer disputes a transaction with their issuing bank. The bank files that disagreement on the cardholder’s behalf, overturning the sale, then claws the funds back from the merchant and returns them to the customer.

Step #1 | Initial Dispute

The process starts when a cardholder contests a transaction by contacting their issuer. I should also note that banks can file disputes without customer input, based on specific merchant errors, but this is less common. Generally, you can classify legitimate chargeback claims under a few basic categories: fraud, authorization errors, processing errors, or fulfillment errors.

Also, remember that each dispute claim is a separate case. Multiple disputed transactions mean multiple potential chargebacks may be filed.

Merchant Tip: You can preempt the need for a provisional credit by using one of several tools designed to prevent chargeback issuances. You have network inquiry tools, like Order Insight and Consumer Clarity, which let the issuer recall transaction information and resolve disputes without the need for a chargeback.

Step #2 | Provisional Credit

Disputes can take several days, or even weeks to resolve. During that time, the funds in question will be tied up, and can’t be accessed by either you or the cardholder. So, the bank will typically issue a conditional refund to the cardholder.

The bank does a preliminary review of the cardholder’s claim. They just want to verify that the transaction happened, and that it was within the timeframe allowed under card network rules. If so, the bank will probably issue the temporary credit as a courtesy to ensure the cardholder has sufficient funds while the dispute is getting resolved.

Step #3 | Chargeback

The issuer checks out the cardholder’s claim. If it seems legitimate, they’ll attach a reason code to the case and send it along to your acquiring bank.

The issuer recoups their money from the acquirer, who will then debit the amount of the original transaction, along with applicable fees, from your account. These fees are meant to cover the acquirer's costs resulting from the chargeback, and are non-refundable.

Merchant Tip: Banks aren’t required to give you a heads-up before they pull funds from your account. Using the tools we mentioned above can help; if all else fails, you can deploy chargeback alerts, which give you advance notification of pending chargebacks and let you refund the buyer to avoid the claim. You can also use Rapid Dispute Resolution from Verifi. This lets you create preset rules to automatically refund buyers in the event of a pending chargeback.

Step #4 | Merchant Reviews Claim

Along with the notification, your acquirer will give you some additional documentation about the transaction being disputed. You can review the chargeback documentation, and see if it makes sense.

If you agree with the buyer’s claim, you can respond that you accept the chargeback. In that case, the whole process ends here. But, if you think the claim is bogus, you can decide that you want to fight the dispute and try to recover your money.

Merchant Tip: Responding to all claims is a good overall strategy. Smaller transactions that might not seem worth the effort, and responding to chargebacks that you don’t plan to challenge anyway might seem like a waste of time. But, acknowledging that you at least received the chargeback shows that you’re engaged, which can improve your standing with banks.

Step #5 | Representment

After gathering compelling evidence that proves the initial transaction was valid, you decide that the claim is not valid, and you want to fight it. This is done through a process called representment.

Basically, you re-submit the transaction to the bank, along with a body of evidence showing that the initial transaction was valid. You’ll also need to include supplemental documents, like a rebuttal letter.

Merchant Tip: Once you decide to challenge a claim, you’ll need to start immediately, as timelines for representment are tight and strict. Think about implementing an organized filing system that lets you locate transaction information quickly. That can greatly decrease your response time.

Step #6 | Bank Review & Decisioning

The issuing bank reviews the new information then makes a decision. They might rule in your favor, and uphold the original transaction. Or, they might pursue one of two other options.

First, the bank may rule in favor of the cardholder, rejecting the additional evidence you provided. Or, in some cases, the bank might accept your response, but still file a second chargeback for a different reason. In the case of a Visa transaction, for example, you’ll get a pre-arb, which is like a message from the bank, rejecting your chargeback response.

Merchant Tip: It should go without saying that your case needs to be as airtight as possible to lower the odds of a second chargeback on the same transaction. Build your case around the reason code provided and the most compelling evidence you can find. Craft a concise, easy-to-read rebuttal letter that outlines your argument. Keep everything clean, clear, and professional.

Did You Know?

The average merchant has a representment win rate of 32%, according to survey data.

Step #7 | Arbitration

If all the parties involved — you, the banks, and the cardholder — are unable to come to an agreement, then the associated card network (Visa, Mastercard, etc.) may step in. This is referred to as arbitration.

The card network will act as a neutral third party between all the different stakeholders. They’ll review the case, then issue a final ruling based on the language laid out in the card network’s rules. This decision can still be appealed, but it’s extremely expensive, and you’re unlikely to see a positive outcome.

Merchant Tip: It takes a lot of time, energy, and determination to get a case to the arbitration stage. There are also significant expenses involved, and a statistically small chance of winning. Unless the transaction represents a considerable amount of money, you’re typically better accepting a denied representment and moving on.

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That’s a rough overview. But, I don’t want to give you the impression that dealing with disputes is a straight-forward, by-the-books process. It isn’t.

The entire system is based on decades of technology updates, rule changes, and increasingly-complex regulations. And, all of it is tacked on to a process created a half century ago. Strict credit card dispute time limits control each phase. Even attempts to simplify things often lead to unintended consequences and increased confusion.

A large part of the problem is a lack of standardization. Different card brands use different terminology, processes, and rules for different stages of the credit card dispute process.

Visa Credit Card Dispute Process

The life cycle of the Visa dispute underwent considerable changes with the adoption of Visa Claims Resolution back in 2018. The most significant changes were Visa’s overhaul of their chargeback reason code list and the introduction of the Allocation and Collaboration workflows.

When a customer files a dispute, the incident will be sent through the “Allocation” workflow if it is designated as a “Fraud” or “Authorization” -related dispute. It goes through a Collaboration workflow for other disputes.

Learn more about the Visa dispute process

Mastercard Credit Card Dispute Process

Like Visa, Mastercard also introduced changes to their credit card dispute process in recent months. The Mastercard Dispute Resolution initiative rollout process wrapped up in April of 2020.

Despite the changes brought with MDR, however, the bulk of the Mastercard chargeback process remains the same.

Learn more about the Mastercard dispute process

Common QuestionAre disputes the same as refunds?No. There’s a big difference between the two, and it’s important that you understand the difference. With a refund, the customer deals directly with you to resolve the issue. The goods are returned, making it possible for you to resell them. Also, they can be processed immediately, and resolved in a few days.

With a chargeback, the customer bypasses you and goes straight to the bank. The customer has no incentive to return goods, and you lose the sale, the goods, & the overhead, plus pay chargeback fees. Plus, it can take weeks — or even months — to resolve.

Learn about how refunds & chargebacks differ

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Know When to Ask for Help

There are several basic practices that might help you prevent disputes and lower your chargeback costs. Three of the most basic dispute-preventing moves that I’d recommend include:

Being a Customer Service Pro

Merchants can avoid many chargebacks by making it easier for customers to reach out to them. This means providing prompt, helpful responses to all phone, email, and social media inquiries and making sure your contact information is easily visible.

Pay Attention to the Details

Billing descriptors and other pertinent merchant information should be clearly identifiable to your customers. These are commonly overlooked dispute triggers, as cardholders may be unable to identify you by these indicators.

Be Up-Front About Merchant Policies

You should clearly present all information up-front. This is especially true for anything related to fees or charges that customers are likely to encounter. Tax, shipping and handling, and return policies should be recognizable to customers.

Learn how to prevent chargebacks

Every minute that you spend focused on credit card dispute resolution is time not spent serving customers and growing your business.

Fortunately, Chargebacks911® can provide a solution. Our tactical Chargeback Representment approach relies on a proprietary combination of machine learning and human oversight. The result: individualized, expertly-reviewed, and compiled cases, promising greater ROI and long-term chargeback reduction plans.

Don’t lose another dollar to a credit card dispute. Contact us today to learn more.

FAQs

Are credit card disputes usually successful?

Valid disputes, when filed correctly, are usually successful. “Valid” means the customer has a legitimate complaint they have already tried to resolve through the merchant. Keep in mind that the original claim may go through, even if the case is fraudulent. Those chargebacks may be successfully overturned through representment, though.

Do credit card companies actually investigate disputes?

Yes, banks investigate disputes. Credit card companies only get involved if the case makes it to the arbitration phase. Even then, the network may rely more heavily on existing evidence rather than launching a new investigation.

On what grounds can you dispute a credit card transaction?

Cardholders can legitimately file disputes on unauthorized use, such as fraudulent purchases. They can also file under what is called “merchant abuse.” This can be deliberate misconduct on the part of the merchant, such as charging customers unreasonably higher prices for using a credit card. Other scenarios, such as being unable to reach a merchant for a simple return, may also be grounds for a dispute.

How often do merchants win credit card disputes?

If an initial dispute is blatantly false, the bank may not allow the case to escalate to a chargeback. If a fraudulent claim does go through, the merchant may be able to successfully represent the case. Overall, however, the system is purposely set up to benefit the client, and therefore lowers the odds that a merchant will win the dispute.

What happens when a merchant loses a dispute?

The cardholder will get a full refund, including any related costs such as shipping or restocking. They have no incentive to return the item in question, so the merchant will likely also lose merchandise. Finally, the merchant will be charged an administrative fee by the bank. These chargeback fees are non-refundable, even if the merchant wins a reversal.

How do I make sure I win a credit card dispute?

For merchants, the key to winning a dispute is a well-crafted rebuttal letter, submitted along with compelling evidence that proves the validity of the original transaction. This rebuttal package must be submitted before the appropriate deadline.

Credit Card DisputesRunning Down the Dispute Process, Plus How & When to Fight Back

In a Nutshell

The Credit Card Dispute Process Guide for Cardholders & Merchants