Trying to Learn About Mastercard Chargeback Rules? Here’s Where to Start Your Research.
More than 110 million merchants in 210 countries across the world accept Mastercard. This includes 10.7 million sellers in the United States alone. Meanwhile, the payment juggernaut counts 3.1 billion cards in circulation, making them second only to Visa in terms of global market penetration.
Merchants celebrate Mastercard for its relatively low fees, built-in fraud prevention tools, wide customer reach, and valuable analytical tools.
Of course, these privileges don’t come cheap. Beyond interchange fees, merchants who accept Mastercard must inevitably contend with the card network’s chargeback process. In this chapter, we provide a quick overview of what Mastercard chargebacks are and why they’re used.
Recommended reading
- Mastercard Dispute Resolution: What You Need to Know
- What are Mastercard Chargeback Fees? The Rundown for 2025
- Mastercard Chargeback Time Limits: The 2025 Guide
- How to Respond to Mastercard Chargebacks
- How Does the Mastercard Chargeback Process Work?
- Best Practices to Avoid the Mastercard EFM & ECM Programs
What is a Mastercard Chargeback?
- Mastercard Chargebacks
A Mastercard chargeback is a credit or debit card charge that is forcibly reversed by an issuing bank that is part of the Mastercard network. This typically happens after a cardholder claims a transaction was the result of fraud or abuse.
[noun]/ˈmas • tər • kard • chärj • bak/
A Mastercard chargeback is exactly what it sounds like: it’s a forced reversal of a transaction that was processed on the Mastercard network.
A Mastercard chargeback is initiated when a Mastercard cardholder files a dispute with their issuing bank. If the issuer investigates the cardholder’s claim and determines that it is valid, the bank will unwind the transaction by withdrawing funds from the merchant’s account and depositing them in the cardholder’s.
The basic concept and process behind a Mastercard chargeback is similar to that of other card networks, like Visa, American Express, or Discover. Chargebacks are a mechanism for protecting cardholders against fraudulent transactions or merchant errors… though they can be misused by cardholders for personal gain, either accidentally or on purpose (more on this in a later chapter).
When Can Cardholders Request Mastercard Chargebacks?
From Mastercard’s perspective, chargebacks exist to combat fraud by providing cardholders with some recourse when fraud does happen. Doing so helps protect the integrity of the Mastercard network and makes it attractive and safe for cardholders, financial institutions, and merchants to support and transact with Mastercard-branded payment methods.
Cardholders can dispute a charge on their Mastercard account if they identify a transaction that:
- they believe is incorrect, invalid, or a duplicate charge
- they believe is fraudulent
- didn't match the seller's description
- didn’t arrive as promised
How Do Cardholders Initiate Mastercard Chargebacks?
A chargeback gets initiated when the cardholder contacts their bank to complain about a purchase, and the purchase in question is eligible for a dispute according to the valid reasons outlined above.
Here’s how the process is supposed to work, from the cardholder’s standpoint:
- 1. The cardholder reviews their statement and identifies a charge resulting from fraud, duplicate billing, etc.
- 2. The cardholder tries to contact the seller and resolve the dispute directly with the party on the other end of the transaction.
- 3. If no resolution can be reached, then the cardholder contacts the bank (not Mastercard) to dispute the transaction.
When the issuer files a chargeback, they’ll attach a reason code, which is meant to give the merchant some clues as to the reason for the dispute. The current, active reason codes outlined in the Mastercard chargeback rules are as follows:
Warning Bulletin File
Account Number Not on File
Questionable Merchant Activity
How Mastercard Chargebacks Impact Merchants
Needless to say, this arrangement is not perfect, and Mastercard chargebacks do not benefit or burden all parties equally.
Like other card networks, Mastercard chargebacks protect cardholders and financial institutions at the expense of merchants. This uneven playing field is starkly evident throughout, from the discrepancy between cardholder filing and merchant response timelines in representment to the fact that it is free to file a Mastercard chargeback as a cardholder but expensive to receive one as a merchant.
If nothing else, the takeaway here is that you are ultimately on the hook when you receive a Mastercard chargeback; even if you were not at fault, and even if the dispute was invalid.
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Avoiding Mastercard Chargebacks: Disclosure Rules for Returns, Exchanges, & Cancellations
When a cardholder is dissatisfied with a product or has difficulties returning the product due to your “tough” refund policies, the buyer may resort to chargebacks. To prevent this, and to stay in compliance with Mastercard’s Transaction Processing Rules, you must disclose refund and return policies on transaction receipts, on your website, on signage in a storefront, or at check-out.
In general, all disclosures should be “sufficiently prominent and clear.” Terms may specify conditions under which returns or exchanges are allowed. They may also list products that are non-refundable or non-exchangeable, address deadlines and time windows, name the party responsible for return delivery charges, or describe refund restrictions (e.g. in-store credit only, original receipt required, etc.).
eCommerce merchants who accept subscription or recurring payments are subject to additional rules, and must communicate related terms “separately from any other terms.” In addition, Mastercard cardholders must have the opportunity to “specifically accept” recurring billing terms (for example, by checking an “accept” box) in order for those terms to be valid.
Take the Next Step to Comply With Mastercard Chargeback Rules
Mastercard chargeback rules are complex for everyone involved. As a merchant, this can feel overwhelming. After all, you’re an expert in your business… but you aren’t a payments industry expert.
So, what happens when you’re hit with chargebacks that proceed to arbitration? Or you find yourself skirting dangerously close to Mastercard’s ECM thresholds?
One solution is to call in the experts.
Chargebacks911®’s team of industry veterans can help you navigate the convoluted chargeback process, prevent invalid disputes, reduce your chargeback rates, and fight chargebacks effectively. Reach out to us for a no-obligation ROI analysis today.
FAQs
How does a chargeback work on Mastercard?
A Mastercard chargeback is initiated when the cardholder files a dispute with the bank that issued their Mastercard. When this occurs, the issuer contacts the acquirer and supplies a chargeback reason code. Mastercard then takes funds associated with the transaction under dispute from the merchant’s account at the acquirer and returns them to the cardholder’s account at the issuer.
What is the 540 days chargeback rule for Mastercard?
The chargeback rules for Mastercard transactions state that, in most cases, cardholders have 120 days to file a chargeback. But, there are some situations in which the cap is extended to 540 days from the transaction date. For example, let’s say a cardholder subscribes to an ongoing gym membership. Halfway through the year, the gym goes bust. The issuer can raise a chargeback under reason code 4853 (Services Not Provided) within 120 calendar days from the date the gym went bust. But, this date must not exceed 540 days from the transaction date.
What is the chargeback threshold for Mastercard?
Merchants exceed Mastercard’s excessive chargeback threshold when they receive more than 100 chargebacks per month and record a chargeback-to-transaction ratio (i.e. number of chargebacks divided by number of sales, multiplied by 100%) of 1.5% or greater.
What are the conditions for chargeback?
Cardholders may file a chargeback if they were the victim of fraud or unauthorized activity, or if they experience merchant billing errors. Defective, damaged, or missing goods are also valid conditions for filing a chargeback.
Is Mastercard good with disputes?
Mastercard provides merchants with easy-to-use dispute management tools, relatively generous chargeback time limits for both cardholders and merchants, and multi-factor authentication security measures that merchants can use to enhance security and mitigate fraud risks at checkout.
