The Merchant's Guide to Mastercard Debit Card Chargebacks

What Makes Mastercard Debit Card Chargebacks Different From Credit Chargebacks?

When it comes to chargebacks, you’re on top of your game. You’ve set chargeback alerts, you use best practices to limit merchant error, and you follow the rules when it’s time to fight back. But, despite your efforts, you’re receiving chargebacks from Mastercard that don't seem to follow the same rules as the others.

Why?

A Mastercard debit card chargeback is similar, but not identical, to a traditional credit card chargeback. The differences between debit and credit cards impact the timeframe for chargebacks, the liability of each party, and more.

In this article, we’ll explain what Mastercard debit chargebacks are, how they differ from credit card chargebacks, and how to prevent them.

Mastercard Debit Chargebacks: What’s Different?

The Mastercard debit card chargeback and credit card chargeback processes work the same way, in a general sense.

In both cases, the cardholder disputes a claim made using their card. The bank then takes the funds back from your account in response. The primary difference between Mastercard debit card chargebacks and credit chargebacks comes down to the level of fraud protection mandated by law, rather than the card network rules.

Mastercard is the world’s second-largest card network, with 2.5 billion cards in circulation. Like other card networks, they have the right to set their own chargeback rules, reason codes, time limits, and more. In fact, the most recent version of the Mastercard Chargeback Guide comes in at more than 700 pages.

All that being said, there are laws that govern the protections to which credit and debit card users are entitled, as well.

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Mastercard Fraud Liability: Credit vs. Debit Cards

Cardholders will bear some degree of liability for fraud. But, the legal protections offered are very different when we look at credit and debit card fraud liability side by side:

Legal Protections for Credit Card Users

Credit cards offer broader fraud protection for consumers. By federal law, a cardholder can only be held liable for $50 of unauthorized transactions following a fraud incident. Beyond that, the bank must either eat the costs, or try to recover the money through the chargeback process.

Legal Protections for Debit Card Users

Under the Electronic Funds Transfer Act, debit card users’ liability is capped at $50 only if the bank is notified within 2 days of the incident. If cardholders report the fraud within 60 days, liability may be limited to $500. Beyond that, they may be liable for all unauthorized charges.

When a cardholder makes a purchase with a debit card, the funds used are debited from funds that exist in the cardholder’s account. Conversely, credit card transactions are made using the bank’s money.

A Mastercard debit card chargeback directly impacts how much money is available to the cardholder at a given moment. Credit card chargebacks, on the other hand, involve funds that must be paid back to the bank at some point, and will temporarily lower the cardholder’s credit limit.

This is an important distinction, as we’ll see in the next section.

Chargebacks don't have to be a “cost of doing business.”

Mastercard Debit Chargebacks: Is There An Opportunity?

The main differences between Mastercard debit card chargebacks and credit card chargebacks is the availability of the funds in question. In debit card transactions, funds are directly debited from the cardholder’s personal account, whereas credit card transactions involve funds on loan from a bank.

Credit Card Chargeback

The issuer, who loaned the money to the cardholder for the transaction, realizes it might lose the funds.

The bank has a vested interest in ensuring quick chargeback resolution.

It’s in the bank’s best interest to keep customers happy, which could mean deciding against the merchant without fully investigating the claim.

Debit Card Chargeback

The issuer has no vested interest, as the funds from a debit transaction come directly from the cardholder’s account.

Because it isn’t a high priority, the process can drag out over weeks or even months.

A debit chargeback doesn’t ensure a refund for the full amount; in fact, there’s a chance nothing will be reimbursed.

Banks may simply "write-off" losses resulting from fraud if the transaction is less than $25. The value is so low, they may not view it as worth the time and money that the chargeback process demands. They just eat the loss. In contrast, they might be more insistent on proceeding with a chargeback based on potential losses they might incur for higher-value purchases.

With legitimate disputes, cardholders will do whatever they believe will get their money back fastest. As we see above, though, there’s no guarantee that a cardholder will succeed with a Mastercard debit card chargeback. The merchant may challenge the dispute (a process called representment), and could recover the funds.

It’s better for everyone involved if the cardholder attempts to resolve matters directly with the merchant as an alternative to a Mastercard debit chargeback. To do that, though, you need to prioritize fraud prevention and customer service.

Preventing Mastercard Debit Card Chargebacks

No matter the network, debit card chargebacks are not going away. In fact, cardholders filed 615 million chargebacks in 2021. That number is not expected to stop or even slow down anytime soon.

To be proactive about this, here are some of our top tips to prevent Mastercard debit chargebacks:

Take a Stand Against Fraud

Any good debit card chargeback management strategy will start with best practices aimed at managing fraud risks. These include:

Encouraging customers to create personal accounts for future purchases.
Requiring strong passwords for accounts.
Educating your staff on fraud tactics and developing trends.
Deploying a multilayer fraud management strategy, backed by machine learning.

Focus on Customer Service

The average merchant can eliminate 20-40% of debit card chargebacks by optimizing their customer experience. Examples of practices to implement include:

Promptly addressing all emails, phone calls and social media messages.
Training staff with enhanced problem-solving and dispute-resolution skills.
Offering round-the-clock, live customer service across all contact channels.
Making contact information easily accessible from every page of your site.

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Simplify Returns

Point blank: it should always be easier for cardholders to request returns than to file chargebacks.

Returns may not be ideal, but they give you an opportunity to rectify the situation in a way that benefits both parties. The consumer gets a refund, and you avoid a chargeback and its resulting fees. Also, issuing a refund provides a chance to build a better rapport with the cardholder. You even have the opportunity to recover the sale.

Be Transparent

It’s never wise to hit a customer with a heap of surprise fees. Instead, offer clear, concise overviews of price, shipping, taxes, and any other fees that you may need to tack onto a sale. Surprising cardholders with items they were not expecting to pay for is a recipe for a chargeback.

Items like forgotten authorization amounts or other murky fees often lead to disputes because the cardholder forgot they were to be debited for that amount, or the amount was higher than expected.

A best practice here is to always clearly state how much your products and services cost, as well as when the cardholder can expect to be charged. If a Mastercard debit card chargeback is filed by mistake, the documentation explaining these fees and their schedule will help you win your representment.

Make it Easy to Cancel

Your knee-jerk reaction may be to say that an easy cancellation process is bad for business. After all, just take a look at gyms, newspapers, or timeshares: services that are difficult to ditch seem to result in “stickier” customers.

Unfortunately, there’s a hidden risk to this practice. If a customer finds it hard to cancel a service… they won’t. They’ll simply file a chargeback with the company that issued their debit card. Ironically, the resulting chargeback fees that you may incur could exceed any incremental revenue resulting from a stickier customer base.

You should make it easy for customers to cancel their debit card purchases. Design and implement a “one-click cancel” process on your website, and immediately process cancellation requests that come through via phone or email.

Be Proactive About Fixing Billing and Fulfillment Errors

No operation is perfect, and you may occasionally charge a customer’s debit card for the wrong amount or deliver the wrong item. Being proactive about resolving errors before they get out of hand goes a long way toward stopping debit card chargebacks.

To determine whether you’re proactive enough, consider how errors are usually identified. Do customers have to email you about issues they’re having? Or, do you identify the issue on your end, solve it unprompted, and notify your customer about the solution?

If you’re reactive to problems and rely on your customers to remedy them, you may be elevating your risk of debit card chargebacks. On the other hand, if you catch an issue before a customer does, then you’re probably on the right track.

Ask the Experts

Chargebacks of every size and stripe are going to happen, no matter what you do to prevent them. What’s worse, the rules and regulations for each type of chargeback vary wildly from network to network. This can make in-house chargeback management an extremely difficult and cost-prohibitive prospect.

Good news, though: help is available.

A free ROI analysis from Chargebacks911® can show you just how much more you can earn by taking control of chargebacks. You can take the first step today to reduce your chargeback risk, recoup lost profits, and keep your business safe from debit card chargebacks.

FAQs

Can you do a chargeback on a debit Mastercard?

Yes. If you made a purchase using your Mastercard debit card, you can contact the bank that issued your debit card to file a chargeback.

Can you chargeback with Mastercard?

Yes. You can reach out to your issuing bank to file a chargeback if you made a purchase using a Mastercard-branded debit or credit card. You can also initiate a chargeback if you made a purchase using a Visa-, American Express-, or Discover-branded debit or credit card.

Do chargebacks work for debit cards?

Yes, you can file a chargeback on purchases made with a debit card, just as you would with credit card transactions.

Why would you file a debit card chargeback?

You can file a debit card chargeback if you detect unauthorized activity on your debit card or if you purchased goods that were delayed, missing, or defective. You may also initiate a chargeback if the merchant you purchased goods or services from charged you the wrong amount, or if you requested a legitimate refund from the merchant but were denied one.

Is it hard to dispute a debit card charge?

It depends. If you have strong evidence that certain charges on your debit card occurred as a result of fraudulent activity, your dispute process may be straightforward. You’re also likely to win a dispute if you have proof that you received damaged goods, or if the goods you purchased were late or did not arrive. However, if you were simply unsatisfied with a purchase, or if you do not strong evidence to make a claim, it may be rejected, or challenged by the merchant.