A comprehensive guide explaining how Mastercard chargebacks work, when and how to challenge them, and ways to make the process work in your favor.
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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.
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.
Mastercard chargebacks occur when a transaction processed on the Mastercard network is forcibly reversed by a cardholder’s issuing bank. When this happens, money is taken from the merchant’s account and returned to the cardholder.
Like all card networks, Mastercard chargebacks ultimately protect the card network first: they unwind fraudulent transactions and give cardholders and financial institutions the confidence they need to transact using the network. For merchants, however, chargebacks can result in headaches, financial losses, or even fines for exceeding certain thresholds.
Read MoreThe Mastercard chargeback process is a tightly-structured and regulated process that allows merchants, cardholders, and financial institutions to address disputes in an efficient manner.
Each card network will have a slightly different process here. Mastercard’s can be broken down into five basic steps: first presentment, first chargeback, second presentment, pre-arbitration, and arbitration. Each stage gets progressively more costly for the losing party.
So, do you get hit with a Mastercard chargeback fee? Unfortunately, the answer is typically “yes”.
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.
Read MoreChargeback 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.
Read MoreYes. 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 to a Mastercard chargeback is 45 days. In practice, though, the real timeframe for your response is usually much shorter.
Read MoreMastercard aggregates both fraudulent and non-fraudulent chargebacks for the purposes of calculating your chargeback rate.
Merchants who receive more than 100 chargebacks per month, and who have a chargeback-to-transaction ratio of 1.5% or greater, will be automatically enrolled in the Mastercard Excessive Chargeback Merchant (ECM) program.
In addition to a raw fraud-to-transaction ratio, the card network uses a combination of transaction volume, fraud value, and 3-D Secure usage to determine whether merchants experience “too much” fraud.
You can — and should — fight all invalid Mastercard chargebacks. You can do this by engaging in the representment process.
You’ll need to understand the chargeback reason code you received, and make note of the time limits involved. Then, you need to compile compelling evidence and draft a concise rebuttal letter that summarizes the documentation submitted.
Once you submit the representment package to your acquirer, the information will be forwarded to the cardholder’s issuing bank via Mastercard. Depending on the complexity of the case, the issuer may come to a final decision about the case within several days… or several weeks.
You submitted your chargeback response. That’s great; but, keep in mind that submitting a response does not necessarily guarantee that the final decision will be in your favor. The case could move on to Mastercard arbitration if all parties can’t come to an agreement.
Most disputes don’t make it to this point, though. Unless the transaction amount is relatively high, you’ll usually lose more than they stand to recover by continuing to fight the dispute at this stage.
Read MoreResponding to invalid chargebacks is important. But, as they say, the best defense is a good offense.
It’s best to try and prevent Mastercard chargebacks before they happen. This starts with taking advantage of the tools offered by Mastercard, including Consumer Clarity and Ethoca Alerts. You should also adopt best practices like optimizing billing descriptors, providing accurate and detailed product descriptions, and giving excellent customer service.
Taking steps to proactively prevent chargebacks is the best way to keep your chargeback and fraud liabilities in check.
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.
Mastercard chargeback rules state that cardholders have 120 days (up to 540 days in select cases) from the date of the original purchase to dispute a charge and get their money back in cases of fraud or abuse by the seller.
Merchants, in turn, have up to 45 days to file a response if they believe the cardholder’s claim was invalid.
Mastercard cardholders have 120 days from the date of purchase to file a chargeback with their issuing bank in most cases. Merchants, meanwhile, face a more limited time window: sellers have at most 45 days to represent a chargeback (or sometimes less, depending on their acquiring bank’s rules).
Yes. As a cardholder, you can dispute a Mastercard charge by contacting your issuing bank, and filing a chargeback claim either online or via phone call.
The 540-day rule for chargebacks refers to an expanded time limit that cardholders have for disputing certain transactions. Specifically, card networks like Visa and Mastercard give consumers up to 540 days to file chargebacks with their issuing banks, provided the reason for the dispute is covered under a particular set of chargeback reason codes.
It should be noted, however, that cardholders have just 120 days from the date of purchase to file a chargeback in most cases.
Valid, qualifying reasons for a chargeback include damaged, defective, different, missing, or severely delayed goods or services. Transactions involving fraud or unauthorized activity also qualify for chargeback protection.
According to the 2024 Chargeback Field Report, merchants win on average 45% of the chargebacks they re-present. Keep in mind that this is just a subset of the chargebacks they fight, though. If we look at chargebacks overall, then the average merchant win rate drops to just 18%.
