04|2023

Credit card chargebacks can be a major headache for merchants. Not only do they result in lost revenue, but they can also damage a merchant’s reputation and even result in the loss of their ability to accept credit card payments altogether. However, by understanding chargeback reason codes and taking steps to prevent them, merchants can significantly reduce the likelihood of chargebacks occurring.

Chargebacks occur when a cardholder disputes a charge with their card issuer, and the issuer then reverses the transaction and debits the merchant’s account. Chargeback reason codes are used by card issuers to categorize and communicate the reason for a chargeback. Some common reason codes include:

  • 30: Services not provided or merchandise not received
  • 41: Cancelled recurring transaction
  • 53: Not as described or defective merchandise
  • 74: Duplicate processing
  • 83: Fraudulent transaction – card absent environment

One of the best ways merchants can avoid chargebacks is by verifying unknown cardholder’s identity by making a copy of their identification and keeping it with the receipt.

Another way merchants can avoid chargebacks is by providing clear and accurate descriptions of the products or services and having the cardholder sign that description. If a cardholder is confused about what they are purchasing or feels that the product or service they received is not as described, they may dispute the charge and initiate a chargeback for the customer dispute reason code 53: Not as described. Furthermore, if there are extenuating circumstances put that in the description and have the cardholder initial that. For example, an auto repair shop may not know exactly what the issue is with a broken car and they may need to do exploratory work in order to track down the problem. A situation like this is ripe for chargeback. So, it is very important to document and get it in writing. By providing detailed product descriptions and ensuring that the customer receives and signs the description of what they were promised, merchants can reduce the likelihood of these types of chargebacks.

Merchants can also prevent chargebacks by providing excellent customer service. This includes responding promptly to customer inquiries and complaints, issuing refunds when appropriate, and making sure that the customer is satisfied with their purchase. By addressing customer concerns before they escalate to the point of a chargeback, merchants can reduce the likelihood of chargebacks.

Finally, merchants should take steps to prevent fraud. This includes verifying the cardholder’s identity, using fraud detection tools like address verification, and monitoring transactions for suspicious activity. If a chargeback is initiated for a fraud reason code, the merchant may be liable for the fraudulent transaction, so it is important to take steps to prevent fraud before it occurs.

In conclusion, chargebacks can be a significant problem for merchants, but by understanding chargeback reason codes and taking steps to prevent them, merchants can reduce the likelihood of chargebacks occurring. By properly authorizing transactions, providing accurate product descriptions, offering excellent customer service, and preventing fraud, merchants can protect their revenue and reputation and ensure the long-term viability of their business.


About the Author

Dan Arndt is the president of CardConnect Paradise
and has been a payments industry professional for over 30 years.
You can find out more about him on his Linkedin page.

Categories:: Credit Card Processing