Chargebacks

Manage chargebacks effectively to minimize losses and protect your business

A chargeback occurs when a customer files a complaint with their card-issuing bank, claiming that a transaction made with their card was unauthorized or there was an issue with the product or service they received.

Common reasons for chargebacks include fraudulent transactions, duplicate charges, or unsatisfactory goods or services.

Customers submit chargeback requests to their card issuing banks.
If the issuing bank recognizes the request as valid, it cancels the transaction and temporarily credits the funds to the customer's account.
The acquiring bank (the bank representing the merchant) receives notification of the chargeback and debits the merchant's account for the transaction amount and any associated fees.
Solidgate informs the merchant of the chargeback and provides an opportunity to dispute it by submitting evidence.
If the merchant’s evidence is sufficient, the chargeback may be reversed, and the funds returned to the merchant’s account. If not, the chargeback remains, and the customer retains the refund.

The chargeback amount may exceed the original payment due to currency exchange rate fluctuations. This occurs when the exchange rate changes between the original transaction and the chargeback, potentially confusing merchants unaware of these variations.

Download the checklist to protect your revenue and keep your business thriving by avoiding costly fraud and chargeback.

Chargeback defense checklist & Subscription fraud

Chargeback structure

Chargeback Webhook entity signifies the start of the dispute process, containing the chargeback type and chargeback flow. The chargeback flow outlines the various stages of the dispute process, including the first chargeback, pre-arbitration, and arbitration.

Each stage appears as a separate entity, similar to how individual transactions are displayed within an order.

Chargebacks sample

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"chargeback": {
  "id": 148812,
  "dispute_date": "2019-07-12",
  "settlement_date": "2022-07-10",
  "amount": 100,
  "currency": "USD",
  "reason_code": 10.4,
  "status": "reversed",
  "reason_group": "Fraud",
  "reason_description": "Fraud – Card-Absent Environment",
  "type": "2nd_chb",
  }
"chargeback_flow": {
  "id": 12345,
  "amount": 100,
  "dispute_amount": 0,
  "currency": "USD",
  "type": "2nd_chb",
  "status": "reversed",
  "date": "2022-07-10",
  "settlement_date": "2022-07-10",
  "updated_date": "2022-07-11",
  "deadline_date": "2022-07-12",
  "arn_code": "127011XXXXXX140503"
  }
}

Types

Type	Description
`1st_chb`	The customer initiates a transaction dispute with their card issuer.
`2nd_chb`	The issuer rejects your defense and initiates pre-arbitration.
`arbitration`	The issuer or cardholder disputes the merchant’s second presentment, moving the case to issuer network arbitration.

1st_chb

A chargeback occurs when a customer disputes a transaction with their card issuer. The merchant has the opportunity to challenge the chargeback request. The challenge involves providing evidence that the transaction is valid and not fraudulent, that the customer is verified, and that the service was provided.

A fee applies for each chargeback processing. Merchants should contact their account manager for information regarding the fee. It is essential to monitor and respond to these disputes as quickly as possible, as prompt action can help reduce costs and increase the chances of winning unjustified chargebacks.

If the merchant cannot provide proof before the chargeback deadline, compelling evidence should be sent to the Solidgate support team.

2nd_chb

If the card issuer declines the merchant’s defense to the cardholder’s inquiry based on the evidence provided, the merchant has two options:

Accept the chargeback request.
Challenge the chargeback request a second time and enter pre-arbitration.

This is known as the second chargeback or pre-arbitration. If the merchant or cardholder disputes the transaction again based on new evidence, the issuing bank can pursue this as a second chargeback, entering pre-arbitration.

arbitration

At this stage, the involved parties - the bank, cardholder, and merchant - cannot resolve the dispute independently. A representative from the card network, such as VISA, MasterCard, or Discover, is asked to step in and make a final decision.

Fees will apply for the arbitration process. For example, in the case of a Mastercard chargeback arbitration, merchants will be required to pay a filing fee of $150, an admin fee of $250, a withdrawal fee of $150, and $100 in technical fees. Due to the high costs associated with these fees, merchants can benefit from disputing only very high-cost chargebacks. Consequently, in most cases, the arbitration process results in a net loss for the merchant, even if they win.

Statuses

Chargeback statuses indicate the different stages of the chargeback process, including investigation and resolution.

Status	Description
`in_progress`	Solidgate has received the Chargeback. The merchant must decide to accept or defend against it.
`document_sent`	Solidgate has received and forwarded the supporting documents to the card scheme. It is no longer possible to change these documents.
`reversed`	The merchant has successfully challenged the chargeback. The disputed amount is credited back, pending issuer review.
`accepted`	This final status occurs if the merchant accepts the dispute or fails to send defense documents.
`resolved`	The dispute is resolved through Proactive Dispute Resolution (RDR) without affecting the dispute ratio. Similar to the Mastercom Collaboration program, merchants, issuers, and acquirers communicate early, enabling refunds to prevent chargebacks and resolve disputes efficiently.
`resolved_reversal`	If a refund and RDR occur simultaneously, the chargeback is canceled to prevent double credit to the cardholder.

Receive chargebacks

Via API

Chargebacks API report is a vital tool for merchants, offering detailed insights into chargeback cases. It provides comprehensive information about each chargeback, including unique identifiers, creation and settlement dates, types, amounts, and the specific reasons and descriptions for chargebacks.

Chargeback Webhook enables real-time alerting of chargeback events, aiding immediate action or system updates. Log event IDs to ensure each is processed only once.

Via HUB

To view the chargeback details

Go to Cards or APMs > Disputes.
Find the needed dispute to analyze.

For APM disputes, have their own specifics.

Additionally, each chargeback gets a Guide
Gain a better understanding of chargebacks nature and manage them effectively. reason code and a detailed description from the card network. These codes are useful for analysis and segmentation.

Respond to chargebacks

If you have evidence confirming the legitimacy of a transaction or if the transaction amount is significant, you may choose to defend against disputes. Chargebacks post-refund can occur due to delays in the issuing bank’s system, customer-initiated chargebacks, discrepancies in refund amounts, or technical issues at the bank. To mitigate these, merchants can submit documentation for representment to prove a refund was issued. However, it’s vital to note that winning such a case still incurs a chargeback fee and affects the chargeback ratio.

To contest a chargeback, submit documents containing compelling evidence to the Solidgate support team. Failure to provide this evidence by the chargeback deadline will result in automatic acceptance of the dispute.

Requirements for dispute document preparation	Example
The total quantity of pages within one case is no more than 19 pages. All pages must be either portrait format only or landscape format only. All pages should be A4 size. Other sizes are not acceptable. Acceptable file format: DOCX. Deadlines vary: 11 days for most cases of chargeback or pre-arbitration decisions, and 7 days for high-risk cases. After the deadline, chargebacks and pre-arbitration are automatically accepted.	Compelling evidence: *Provide as much information as possible about the customer, including screenshots of agreements, customer documents, and proofs of product use. DOTX Template for compelling evidence

Requirements for dispute document preparation

Example

The total quantity of pages within one case is no more than 19 pages.
All pages must be either portrait format only or landscape format only.
All pages should be A4 size. Other sizes are not acceptable.
Acceptable file format: DOCX.
Deadlines vary: 11 days for most cases of chargeback or pre-arbitration decisions, and 7 days for high-risk cases. After the deadline, chargebacks and pre-arbitration are automatically accepted.

Compelling evidence: *Provide as much information as possible about the customer, including screenshots of agreements, customer documents, and proofs of product use.

DOTX Template for compelling evidence

Reason code	Digital product or service	Physical products
Fraud - card-absent environment Visa: 10.4 Mastercard: 4837 AMEX: F29 Discover: UA02	Description, date, and time of the products or services successfully downloaded. The evidence must also contain at least two of the following: Customer's IP address and their device's geographical location at the time of purchase Device ID and name of the device Customer name and email address linked to their customer profile Evidence that the customer logged into their account for your business before the transaction date Evidence that your website or app was accessed by the cardholder for purchase or services on or after the transaction date Evidence that the same device and card used in the disputed payment was used in a previous payment that was not disputed Description of the digital goods and the date and time they were purchased and downloaded Record of previous non-disputed payments	Evidence such as photographs or emails to prove a link between the person receiving products and the cardholder If the products are collected from a physical location, provide: Cardholder signature on the pickup form A copy of identification presented by the cardholder Details of identification presented by the cardholder The address to which a physical product was shipped, matching the billing address verified with AVS The date on which a physical product began its route to the shipping address Courier's GPS location proving the product was delivered
Merchandise/service not provided Visa: 13.1 Mastercard: 4855 AMEX: F29 Discover: UA02
Duplicate processing/paid by other means Visa: 12.6 Mastercard: 4834 AMEX: P08 Discover: DP	The charge ID for the previous payment that appears to be a duplicate of the one that is disputed An explanation of the difference between the disputed payment and the prior one that appears to be a duplicate Documentation for the prior payment that can uniquely identify it, such as a separate receipt Copy of invoices for two separate orders	The charge ID for the previous payment that appears to be a duplicate of the one that is disputed An explanation of the difference between the disputed payment and the prior one that appears to be a duplicate Documentation for the prior payment that can uniquely identify it, such as a separate receipt Copy of invoices for two separate orders A shipping label or receipt for the disputed payment
Cancelled recurring transaction Visa: 13.2 Mastercard: 4841 AMEX: C28 Discover: AP	Any server or activity logs showing proof that the cardholder accessed or downloaded the purchased digital product Your subscription cancellation policy, as shown to the customer An explanation of how and when the customer was shown your cancellation policy prior to purchase A notification sent to the customer of renewal or continuation of the subscription Proof that notice of upcoming billing was sent to cardholder 10 days before the transaction Proof that the services were used between the billing date and the cancellation date The cardholder requested a cancellation for a different date, and services were provided until that date	Your subscription cancellation policy, as shown to the customer An explanation of how and when the customer was shown your cancellation policy prior to purchase A notification sent to the customer of renewal or continuation of the subscription Proof that notice of upcoming billing was sent to cardholder 10 days before the transaction Proof that the cardholder did not return the merchandise

Consider accepting the dispute in the following scenarios:

You lack the necessary information to address the chargeback Guide
Gain a better understanding of chargebacks nature and manage them effectively. reason code .
The transaction:
- cost does not outweigh the potential loss incurred from a second chargeback fee.
- amount is too low to justify the effort in gathering compelling evidence.
- has been identified as fraudulent.
The customer has returned the goods or there was a failure in delivering the goods.

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