How To Win a Chargeback as a Merchant (Credit Card Dispute Response Guide)

While chargebacks are an unavoidable part of operating a business, you don’t have to just live with them. By fighting chargeback disputes, you can recuperate the cost of the transaction. 

To learn how to win a chargeback as a merchant, you need to understand chargeback reason codes and the best evidence for fighting each code. All of the evidence you gather must be submitted on time, or it won’t be considered as a part of your case.

From writing a rebuttal letter to choosing the most effective evidence for your case, we’ll do a deep dive into strategies for fighting and winning your chargeback cases.

TL;DR

• Chargebacks occur when a customer disputes a transaction, so the issuing bank has to determine if the transaction is valid.
• If the merchant wins the chargeback, they get to keep the transaction funds. Some payment processors also return the chargeback fee as well.
• It isn’t a good idea to fight every chargeback. If the claim is legitimate or the merchant lacks evidence, it is often easier to concede the case.
• To win a chargeback dispute, the merchant must understand the reason code. This code explains why the dispute happened. 
• Evidence must be compiled to match the reason code. Then, the evidence must be submitted on time in order to be considered part of the case.
• Along with your evidence, you’ll need a rebuttal letter. This serves as a cover letter that lists all of the evidence involved and the merchant’s stance in the case.
• Representment is the formal process in which evidence is submitted.
• If representment is not successful, merchants can submit the case for arbitration. Because of how expensive arbitration is, it rarely makes financial sense.

It is far easier and more cost-effective to prevent chargebacks than to dispute them. With the help of PayCompass, companies can get advanced chargeback prevention tools.

What Does It Mean To Win a Chargeback?

A chargeback occurs when a customer disputes a transaction. Then, the issuing bank investigates the customer’s claim to determine if the funds should be returned to them. 

As a merchant, you can win the chargeback if the issuing bank decides in your favor. For example, the issuing bank may determine that the cancellation request was too late, so the transaction was valid.

Once you win, the funds are returned to your merchant account. Some payment processors will also refund the chargeback fee if you are successful in winning your dispute. 

If you lose the chargeback case, the transaction is reversed. On top of losing the fees, you’ll also have to pay the chargeback fee. If any products or services have been provided already, you will not recover those costs. 

Over the long run, losing chargeback disputes can affect your merchant account status. Your account may become frozen or terminated. If the chargeback rate is high enough, you may need to work with a high-risk merchant account provider instead of your current provider.

Should You Fight Every Chargeback?

Learning how to win a chargeback as a merchant is important for reducing the cost of chargebacks and maintaining your account status. However, you shouldn’t fight against legitimate claims. If the customer’s reason code is accurate, you should allow the bank to decide in their favor. Additionally, there are a few other scenarios where it makes sense not to fight against a chargeback claim.

When It Makes Sense To Fight Chargebacks

There are multiple situations where it makes sense to fight the chargeback.

• You know the customer’s claim isn’t valid.
• You have all of the documentation and evidence you need to show that their claim isn’t valid.
• The amount of time you will spend gathering evidence is justified by the cost of the chargeback.
• You have communication records with the customer before the dispute happened.

When It Doesn’t Make Sense To Fight Chargebacks

Even when you’re dealing with a questionable chargeback dispute, fighting the chargeback doesn’t always make sense. If you don’t have the right documentation or the chargeback is for a low amount, the costs involved in fighting the dispute might not be worth the amount you could potentially gain. You should strongly consider letting the chargeback go if any of the following situations are true.

• You don’t have any documentation of customer communication, receipt of the return policy, delivery confirmation, or other evidence.
• The money you’d gain by winning is outweighed by the money you would lose in labor costs if you try to fight the case.
• You believe that the case is a true example of fraud.
• You made a genuine error, such as shipping the wrong item.

How To Win a Chargeback as a Merchant

So, what are the key steps for learning how to win a credit card dispute as a merchant?

Identify the Reason Code

Each chargeback comes with a reason code that explains why the chargeback dispute is happening. The type of evidence you provide will be based on the reason code involved.

Decide if the Dispute Is Worth Fighting

Next, you’ll need to decide if it is worth your company’s time, energy, and money to fight the claim. To do so, first consider if the chargeback is legitimate. If you made a mistake or genuine fraud occurred, there’s no point in fighting it. Similarly, you might not want to fight a claim if it has a low value or you don’t have evidence.

Respond on Time

Representment claims have set timelines involved. Note the deadline for submitting evidence because you’ll automatically lose the dispute if you respond too late.

Match the Evidence to the Reason Code

Showing your company’s return policy won’t help if the claim is based on fraud. When compiling evidence, you need to make sure you gather the appropriate documentation for the reason code. You should label the documentation so that it is easy to navigate and avoid including anything that is unnecessary.

Build a Clear Timeline

To help the investigator understand the claim, create a clear timeline of what happened. It should include key points, such as the purchase date, usage of the service or product, delivery date, cancellation request, and refund date. Then, use evidence to support the occurrence of each event.

Avoid Common Mistakes That Lead to Automatic Losses

Many chargeback disputes are lost because of preventable errors. As part of your dispute management process, avoid the following common mistakes.

• Don’t forget important deadlines.
• Don’t turn in the same evidence for every chargeback dispute.
• Don’t dispute transactions that violate your company’s policies.
• Don’t dispute a chargeback request that you know is valid.

How Does Representment Work? 

Chargeback representment is the process of representing yourself in the chargeback dispute. “Representment” literally means an act of representing yourself to the bank. The representment process goes through a few essential steps.

1. You are notified about the dispute. 
2. You decide to fight the chargeback dispute.
3. You gather evidence supporting your case.
4. You write a rebuttal letter that outlines your case and the evidence you compiled.
5. You submit the rebuttal letter and evidence.
6. The issuer reviews the evidence.
7. The issuer makes a decision about the case.

What Happens If Representment Fails?

If you lose your chargeback case, the funds involved will be returned to the customer. You will have to pay a chargeback fee, as well as all of the labor costs involved in responding to the chargeback dispute.

You also have the option of appealing the case with the card network, which is a process known as arbitration. However, the fee for using the arbitration process can easily add up to hundreds of dollars. Because of this, arbitration only makes sense for high-dollar transactions or cases where you have strong evidence proving your side.

Unless you submit the case for arbitration, the chargeback is considered final. At this point, it will be tallied into your chargeback rate, potentially leading to higher payment processing costs.

The Best Evidence for Common Dispute Types

If you’re trying to win a credit card dispute as a merchant, it helps to start with the reason code. When a dispute is filed, the issuing bank assigns a reason code that explains why the chargeback is happening. The type of evidence you need will vary based on this reason. 

Fraudulent Transaction

A fraudulent transaction code appears if the customer says that they did not authorize the transaction. For example, their card may have been stolen, or their child may have used it without permission.

As the merchant, you need to provide evidence that shows the customer was the person responsible for the transaction.

• AVS and CVV: If you use AVS or CVV as a part of the transaction process, you can show that these codes match the card used.
• Proof of Delivery: Provide delivery notifications from the carrier that show the item was delivered to the customer’s address. If you have a signed delivery confirmation, it can also help.
• Transaction History: Show proof of the customer’s previous legitimate transactions.
• Device Information and IP Addresses: This information can demonstrate that the customer ordered from their actual location.

Product Not Received

This reason code means that the customer paid for their transaction, but they never received the product. The best evidence to win this kind of chargeback involves showing that the product was actually received.

• Shipping Information and Delivery Confirmation: You can use tracking information, shipping data, and delivery confirmation to show that the package was shipped and received. Ideally, you want delivery records that show the time, date, and location where the package was delivered. 
• Signature Confirmation: For expensive products, requesting a signature on delivery can reduce the likelihood that someone wins a chargeback for not receiving their items.
• Proof of Address: Show that the address where the package was delivered is also the address where the customer is located.
• Emails and Customer Communication: If the customer emailed about a problem with the item or acknowledged that they received it in some way, you can use this communication to show that the product was received.

Product Not as Described

When you see this reason code, the product is defective, damaged, or inaccurate in some way. To counter this dispute, you’ll need to show that the product was exactly as it was described.

• Product Description: Use written descriptions, images, and videos to show that the customer was aware of what the product would be like when it arrived.
• Customer Communication: If the customer said anything about being satisfied with the product, you can use that communication to show that the product was satisfactory.
• Return Policy: Show that the return policy was disclosed during the checkout process, and the customer agreed to it.
• Proof of No Return Request: Demonstrate that the customer did not request a return or exchange prior to requesting a chargeback.

Credit Not Processed

This reason occurs if the customer submitted a return or canceled their purchase, and it wasn’t refunded. To win this chargeback, you’ll need to show that the customer’s refund was processed and paid correctly.

• Refund Policy: Show what the refund policy is, especially the timeline for how quickly refunds happen. You should also demonstrate that the policy was reviewed and accepted during the checkout process.
• Transaction and Refund Records: Use records from the transaction to show the dates, amounts, and method for the transaction and refund.
• Communication: If there was any communication with the customer about the refund or any refund delays, you can use it.

Subscription Canceled

This reason code occurs if the customer cancels the subscription but was charged anyway. As the merchant, you’ll need to show that the subscription was still active or the cancellation had not been received at the time the customer’s payment method was charged. For example, you could show a cancellation request email that was sent following the cancellation cutoff.

• Terms and Conditions: Provide the terms and conditions for your company. Additionally, show that the customer accepted those terms during the signup process.
• Cancellation Records: Show the presence or absence of a cancellation request. If it wasn’t sent or was sent too late to be processed before the cutoff, this documentation will support your case.
• Activity Logs: You can use activity logs to show that the customer was continuing to use their account after they requested the cancellation.

No-Show and Canceled Reservations

In travel and hospitality businesses, no-show reservations and cancellations are common. When this reason code appears, it’s because the customer says they were charged for an appointment they did not attend. To win this chargeback, you’ll have to show that they used your services or that your policies did not allow the cancellation.

• Cancellation Policies: Your cancellation policy can show if the customer was able to cancel the appointment and under what circumstances.
• Policy Acceptance: You’ll also need to show the customer checked a box or accepted the policy in some other way.
• Reservations and Booking: If you emailed the reservation or booking confirmation, you can use this to show that the customer made the appointment and was aware of it.
• Cancellation Records: To win your chargeback, you’ll need to demonstrate that the customer canceled the confirmation incorrectly or belatedly. You’ll also want to provide any communication the customer provides about refunds, bookings, and cancellations.
• Check-in Documentation: If the customer was actually present for the appointment, showing a record of them checking in can prove that they were there.

How To Write a Rebuttal Letter

Your rebuttal letter is basically the cover page for your case, and it is one of the most important tools in how to win a chargeback as a merchant. This professional document gives the investigator context into the case. 

The letter must include transaction identifiers, such as the date, total, and order number. You’ll need to address the reason code you are disputing and succinctly summarize why you believe the chargeback is invalid. Before closing the letter with your request for a reversal, you should add a bulleted list of the evidence included and a description of why it supports your claim.

How To Prevent Future Chargeback Disputes

Even when you win chargeback disputes, gathering evidence and responding to the case can be costly. To avoid these expenses in the future, it’s essential to adopt a few important chargeback prevention measures.

• Create clear product descriptions.
• Send reminder emails before subscription payments are processed.
• Clarify shipping timelines and return policies upfront.
• Require AVS and CVV checks.
• Use tracking numbers with each shipment.
• Require a signature on delivery for high-value orders.
• Proactively communicate shipping delays.
• Provide multiple customer support channels.
• Quickly respond to refund and billing questions.
• Analyze chargebacks to spot and fix recurring issues.

How PayCompass Can Help You Avoid Chargebacks

In an average year, merchants win just 45% of chargeback cases. By learning how to win a credit card dispute as a merchant, you can avoid lost transaction costs and fees. 

Chargebacks don’t just affect your revenue. They impact your risk thresholds, operational costs, and the long-term viability of your merchant account. By working with PayCompass, you can access end-to-end chargeback prevention tools that can help you win disputes and prevent chargebacks from happening.

With our help, you can understand reason codes and the best evidence for fighting each reason. Through our structured approach to representment, you can make sure your evidence is filed on time.

Besides helping you figure out how to win a chargeback as a merchant, we can help you prevent future chargebacks from occurring. Our tools provide better visibility of transactions and customer recognition. Through our advanced analytics, you can spot recurring reasons why chargebacks are happening at your company. From expert guidance to preventative tools, PayCompass can help you navigate your chargeback disputes with ease.

Final Thoughts

Learning how to win a chargeback as a merchant is essential. However, winning a chargeback is about more than just submitting a bunch of paperwork. You need to compile the right type of evidence for each specific reason code, and all of the documentation must be submitted on time.

Over the long run, the best approach to chargebacks isn’t simply winning each dispute on a case-by-case basis. You need to prevent chargebacks from occurring in the first place. Clearer policies, better customer support, improved shipping communication, and fraud prevention tools can prevent chargebacks from becoming necessary. 

Whether you want to stop chargebacks from happening or need to fight an existing chargeback, we can help. PayCompass has years of experience helping merchants improve their payment processing practices. To learn more about our services, reach out to our team of payment experts today.