Optimizing Charge back Reason Codes

Chargebacks are a nasty cost of doing business when it comes to offering your customer’s electronic payment options. However, did you know that every chargeback you receive is accompanied by a reason code? These codes differ by the card network but serve the purpose of describing the motivation behind the transaction dispute that has led to your chargeback. What’s more impactful for your internal metrics and performance is using these codes to optimize your business for better.

First let’s look at some MasterCard chargeback codes and their causes:

  • 4802 – Requested or required item illegible or missing.
  • Cause: merchant failed to provide necessary documentation or what was provided was illegible.
  • 4803 – Documentation received was invalid or incomplete
  • Cause: Merchant didn’t provide the necessary documentation
  • 4855 – Services not provided or merchandise not received
  • Cause: Merchant did not provide services or failed to send the products, merchant billed the cardholder before sending the products, merchant did not see the items by the agreed up delivery date, and the merchant did not make products available for pick-up.

Now, here is some of the VISA chargeback codes and their causes:

  • 41 – Cancelled recurring transaction/installment billing dispute
  • Cause: The cardholder requested the transactions be terminated but was charged anyway, the merchant processed a transaction for a card that had been closed, the transaction exceeded the predetermined dollar amount and the merchant failed to notify the customer 10 days before the charge, and the merchant prematurely billed an installment payment.
  • 57 – Fraudulent multiple transactions/Fraudulent processing of transactions
  • Cause: The merchant didn’t void multiple transactions or the merchant tried to fraudulently process transactions.

Ultimately, reason codes are essential to managing your chargebacks and should be optimized for your business. Some quick ways you can use reason codes to help streamline your payments data are:

  • Analyze them to understand and enhance your customers’ experiences.
  • Decide which category they fall into: Merchant Error, Criminal Fraud or Friendly Fraud.
  • Create a prevention strategy for future chargebacks occurring in your business.

How do I move forward?

Consumers exploit holes in the chargeback process all the time. Reason code intelligence is very important to understanding the true reasons why chargebacks occur. Genuine understanding comes from detailed analysis and innovative technology centered on and around your payments portfolio.