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Mastercard Chargebacks Resources Hub

Mastercard Chargebacks Resources Hub

A comprehensive guide explaining how Mastercard chargebacks work, when and how to challenge them, and ways to make the process work in your favor.

How Mastercard Chargebacks Work: Fees, Time Limits & More

How Mastercard Chargebacks Work: Fees, Time Limits & More

There were roughly 1.3 billion Mastercard-branded cards in circulation at the end of 2021. This makes Mastercard the second-largest card brand in the world by card volume. With that many users, an occasional bad transaction is almost inevitable.

The Mastercard chargeback process is similar to the process used by other card brands like Visa at least first glance. The cardholder has a complaint and contacts the bank that issued the credit card. If the issuer feels the claim is valid, it will remove the transaction amount from the merchant’s account and return it to the cardholder.

The law allows each card scheme to set its own specific requirements and parameters, though, so the rules vary by brand. In other words: contesting a Mastercard chargeback is completely different from fighting a Visa dispute.

In response, we’ve created this guide to help explain the ins and outs of Mastercard chargeback rules and processes. We cover how Mastercard chargebacks work, when and how they should be challenged, and ways to make the process work in merchants’ favor.

Compliance Note

Mastercard chargeback rules can change at any time. While this article reflects the most current information available, merchants may also consult the latest edition of the Mastercard Chargeback Guide to ensure compliance.

What is the Mastercard Chargeback Process?

Even the most basic chargeback process has multiple stages. It helps to understand what happens at each of these stages. The following list also points out Mastercard’s terminology, which differs from other card networks like Visa and Discover.

First Presentment

Step 01 | First Presentment

The original transaction. The charge is "presented" to the bank and credited to the merchant's account. Later, the cardholder disputes the charge with their bank.

First Chargeback

Step 02 | First Chargeback

The bank reverses the initial charge. If the merchant accepts the chargeback, the case is closed. If they opt to challenge the claim, the chargeback moves forward to the next step.

Second Presentment

Step 03 | Second Presentment

The merchant “re-presents” the transaction by submitting it a second time, along with evidence to refute the cardholder’s claim.


Step 04 | Pre-Arbitration

The bank reviews the merchant’s second presentment. If they feel the evidence is insufficient, the challenge is rejected. Here again, the merchant can accept the decision and end the process or move to the next step.


Step 06 | Arbitration

The merchant and bank appeal to Mastercard. The card network is asked to review the case and all evidence provided by each party and make a final ruling.

Previously, banks had the ability to request more information from merchants before initiating a chargeback (this is called a "retrieval request"). This would have been carried out after the first presentment but before the first chargeback. This option is no longer available, though. All pre-chargeback requests for more information are now done solely through the collaboration workflow.

Is There a Fee for a Mastercard Chargeback?

Yes, generally speaking.

Depending on the circumstances, Mastercard chargeback fees can be attached to each case. These fees add up quickly. That’s not the worst of it, though; merchants who choose to fight a chargeback could face additional fees. These fees will add up as the Mastercard chargeback process drags on.

Not all fees will apply in every situation, of course. Administrative and appeal fees would only apply if the chargeback advances to arbitration. Other penalties, like the Mastercard Dispute Administration Fee, will apply to chargebacks filed in response to intra- and inter-European transactions.

Learn more about Mastercard chargeback fees

What are Mastercard Chargeback Reason Codes?

Chargeback reason codes are a system of alphanumeric codes created by credit card networks. These codes are meant to indicate why a customer or bank initiated a chargeback or dispute against a transaction. These codes help merchants understand the specific reason for the chargeback, such as fraud, unauthorized transactions, or goods not received.

In simple terms, Mastercard reason codes are meant to tell merchants why a cardholder requested a Mastercard chargeback. In the event of alleged criminal fraud or merchant error, the code returned with the transaction identifies the reason behind the chargeback, potentially exposing faults in the merchant’s processes.

Each card network maintains its own unique list of reason codes. Check out the complete list of Mastercard codes below:

Learn more about Mastercard reason codes

Are There Time Limits on Mastercard Chargebacks?

Yes. Different time limits apply for cardholders looking to file chargebacks, and merchants who want to file a chargeback response.

The chargeback filing period for Mastercard cardholders is usually 120 days. In some cases, it can be extended to 540 days or more, depending on the reason code. That means merchants can receive chargebacks on sales completed over a year ago.

While cardholders have a lengthy window of time to file chargebacks, banks and merchants don't have that luxury. For US merchants, the deadline to respond in a Mastercard chargeback situation is 45 days. They also have 30 days in which to respond — or accept — a second-round chargeback.

Most of Mastercard’s mandated time limits start on the claim’s Central Site Business Date. That’s usually the day after the last action on the claim. For instance, the 45-day period issuers have to initiate pre-arbitration starts on the day after the representment was filed.

Learn more about Mastercard time limits

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How Many Mastercard Chargebacks are Considered “Too Many”?

Like other card networks, Mastercard sets a monthly limit on the acceptable number of chargebacks a merchant can have. The exact number varies based on the specifics of each business. This is what’s often referred to as Mastercard’s “chargeback threshold.”

Previously, merchants were required to keep their chargeback rate under 1% of monthly transactions. However, this has since been updated to 1.5%.

Learn more about Mastercard chargeback thresholds

Exceeding this threshold means violating Mastercard rules. In response, merchants can be added to the Mastercard Excessive Chargeback Merchant (ECM) program.

Participation in this program will lead to costly fees and restrictions on the merchant’s activities. This is serious business; if the merchant is unable to get their chargebacks under control after a set amount of time within the program, it could put the status of their business in jeopardy.

Learn more about the Mastercard ECM program

Lastly, the Mastercard Excessive Fraud Merchant (EFM) program targets a different aspect of merchant activity: fraudulent transactions.

There's a set threshold for fraud, measured by the dollar value of fraud chargebacks and the percentage of fraudulent transactions relative to overall sales. Like with the ECM, exceeding these thresholds can result in penalties and increased scrutiny, underlining the importance of deploying anti-fraud measures like 3-D Secure to minimize the risk of crossing these limits​​.

Learn more about the Mastercard EFM program

Can Merchants Fight Invalid Mastercard Chargebacks?

Yes. If a merchant suspects that a chargeback was filed without a valid reason, they may respond through a process known as representment.

Merchants should absolutely not fight chargebacks resulting from genuine criminal fraud or errors on the merchant’s part. However, invalid Mastercard chargebacks should be challenged through representment whenever possible. The merchant recovers funds, and consumers learn that filing a bogus claim has consequences.

We spoke earlier of the different phases involved in a Mastercard chargeback leading up to chargeback representment. Now, let’s examine the representment process itself:

  1. The merchant consults the Mastercard Chargeback Guide to determine the documentation needed to contest the designated reason code.
  2. The merchant submits a detailed chargeback rebuttal letter to the acquirer, along with as much compelling evidence as possible.
  3. The acquirer forwards the merchant’s response to Mastercard, who reviews the dispute and passes the case to the issuer.
  4. The issuer evaluates the documentation and decides in favor of either the merchant or the cardholder.

Chargebacks settled in the merchant’s favor result in the transaction amount being re-deposited into the merchant’s account. Chargeback fees, however, will not be refunded.

Learn more about representment

Also, keep in mind that submitting a representment does not guarantee that the final decision will be in the merchant’s favor. As noted above, the case could move on to Mastercard arbitration. Unless the transaction amount is relatively high, the merchant will usually lose more than they stand to recover by continuing to fight the dispute at this point.

Learn more about Mastercard arbitration

Preventing Mastercard Chargebacks

As you can see, dealing with Mastercard chargebacks can be a heavy burden. Your best bet is to prevent chargebacks before they happen. Fortunately, Mastercard also provides a couple of tools that can be very helpful to this end.

Consumer Clarity

Consumer Clarity

Consumer Clarity is a dispute resolution platform created by Ethoca, delivering real-time data sharing between participating merchants and cardholders. This two-way communication can help resolve transaction inquiries that would otherwise become chargebacks.

Consumer Clarity provides details about a transaction that would not be visible on a cardholder’s statement. It helps answer legitimate customer questions, and in many cases helps identify and prove the validity of a charge. More importantly, it works in real time, providing up-to-the-minute insights about a purchase. If the customer’s issue is successfully resolved, the dispute is stopped before it even gets filed.

Learn more about Consumer Clarity

Mastercom Collaboration

Mastercom Collaboration

In 2022, Mastercard rolled out an enhanced version of their existing Collaboration tool for all the players within the payment journey. This tool works like an early warning system for chargebacks, notifying merchants that a cardholder has disputed a charge. This gives the merchant time to review the claim and see if they can resolve it directly.

Acquirers can review claims, then either contact the merchant directly for instructions on how to respond, or respond on their merchant’s behalf based on a predetermined agreement.

Learn more about Mastercom Collaboration

The Bottom Line

Tools like Consumer Clarity and Mastercom Collaboration are great assets to help stop disputes. They won’t stop every chargeback, though.

For merchants interested in comprehensive protection, using in-house resources may seem cost effective. However, most merchants find that outsourced chargeback management is more efficient, produces better results, and offers higher return on investment.

True chargeback professionals have the knowledge, resources, and industry relationships necessary to stay on top of ever-changing threats and updated regulations. They’ll also bring the experience to handle disputes quickly and efficiently.

The experts at Chargebacks911® have been helping merchants manage chargebacks for over a decade. If you’re struggling with chargebacks from Mastercard or any other source, we can help you lower your ratio and increase your ROI. For a free demo, contact us today.


How does Mastercard handle chargebacks?

Mastercard manages chargebacks by providing a standardized process for disputing transactions, where customers can file a chargeback claim if they have issues with a purchase. This process involves investigation and documentation requirements, with reason codes used to classify the nature of each dispute, guiding resolutions between merchants, banks, and cardholders.

How long does a Mastercard chargeback take?

The chargeback filing period for Mastercard cardholders is 120 days in most cases. In some situations, though, it can be upwards of 540 days, depending on the reason code. Merchants, on the other hand, have 45 days to challenge a chargeback and 30 days to accept a pre-arbitration decision.

Can I dispute a charge on my Mastercard?

Yes, you can dispute a charge on your Mastercard account if you recognize a transaction you believe is incorrect, fraudulent, or for a purchase that didn't meet the seller's description. This is initiated by contacting your card issuer to file a dispute, which then follows Mastercard's chargeback process to resolve the issue.

What is the chargeback threshold for Mastercard?

Previously, merchants were required to keep their chargeback rate under 1% of monthly transactions, but this has since been updated to 1.5%. Exceeding this threshold can place a merchant in the Mastercard Excessive Chargeback Merchant Program, potentially leading to fees, restrictions, and, ultimately, endangerment of the business​​.

Do merchants usually fight chargebacks?

Not usually, but yes, they do. Many merchants consider chargebacks a cost of doing business, but this is simply not the case. Others, however, have figured out that challenging illegitimate chargebacks can decrease their chargeback ratio and improve their standing with banks and customers.

According to the 2023 Chargeback Field Report, companies that leverage representment software and services through a platform provider saw a net recovery rate that was more than 55% higher than merchants that don’t.

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