Knowledge is the Key to Fighting Credit Card Transaction Disputes

Credit Card Processor

The decision to sell products online means learning new terminology, processes, and technology. Plus, the upside and downside of running an e-commerce business. One of the first things to develop is an intimate knowledge of the credit card processing system. Also the transaction dispute resolution.

How it Works

When a brick-and-mortar business accepts credit or debit card payments for its products or services signature is available from the customer. The customer is ordinarily physically present to present their card for payment. Having a signature is the merchant’s proof that the customer authorized payment. The product or service delivery was there and the customer was initially happy with their purchase.

But, when an e-commerce business receives payment for an online order. Cardholder verification, proof of delivery and customer satisfaction is more difficult. The reason being there is no visual card examination or in-person customer contact with a written signature authorization. These are defined as card-not-present transactions.

Customers who use credit and debit cards to make online purchases have an advantage over other customers. Because they can contact the bank who offers their card and ask for their money back when they are unhappy with a purchase. That too without first contacting the merchant.

Transaction Disputes 

There are a variety of reasons for transaction disputes and cardholders have 60 days in which to file a dispute.

As soon as a cardholder disputes a transaction, one of two things will happen. The issuing bank will make a retrieval request or initiate a chargeback.

When an issuing bank contacts a merchant to obtain information about a transaction before initiating a formal chargeback case. This is an issuing bank’s first attempt to settle a dispute and can get via email or over the phone. Or through a conference call with the customer and the merchant.

During this process, the merchant gets an opportunity to explain why the transaction is valid. As a result, the retrieval process is not often used because customers are reluctant to confront a merchant over the phone.

When issuing banks initiate chargebacks, so five participants play a role in the resolution process:


A person with a credit or debit card who has doubt on the validity of a transaction to their issuing bank. Hence, this is ordinarily the customer who gets products or services online.

Issuing Bank

The bank from whom the use of credit or debit card takes place. It is a bank that initiates chargeback cases and requests provisional credit from merchant banks.


The online business from whom a purchase was made by a cardholder.

Merchant’s Bank

The bank sponsoring a merchant account that gives a merchant the ability to accept credit and debit card payments.

Payment Processor 

A company selection by a merchant to handle their credit and debit card transactions.

So, successfully fighting a chargeback demands knowledge of the rules and regulations set out by card brands, banks, and payment processors. Also, the chargeback reason codes. Each card brand has their own chargeback reason codes. This defines the general justification a customer has for filing a chargeback. And, helps merchants know what documentation is must validate transactions.

So, the key to validating transactions and winning or losing chargeback claims depends on having a broad knowledge. Knowledge of online payment processing and the transaction dispute resolution process. To be effective, merchants need to have a specially trained in-house team. Or to hire an outsourcing agency to handle chargebacks effectively.

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