Mastercard Chargeback Guide

Accountants settling chargebacks_CardinalCommerceChargebacks are disputed transactions that involve a refund, and a subsequent transfer of funds from the merchant’s account back to the consumer’s account. Mastercard chargebacks are always accompanied by a “reason code”—a number with an accompanying explanation that helps determine the cause of the problem. Historically, Mastercard’s list of reason codes has been quite long, but recently, it was simplified.

Understand Mastercard Reason Codes

The reason code that accompanies a Mastercard chargeback is a four-digit number that identifies the cause of the chargeback situation. The most common chargeback reason codes fall into a few distinct categories: errors in merchant information, card authorization, transaction processing, delivery and amount of sale. Mastercard offers consultation to their business users regarding how to avoid chargebacks and how to better understand these reason codes. For small business owners who are unaware of this process, there’s an entire Mastercard chargeback guide available online. 

Follow Mastercard’s Own Tips for Avoiding Chargebacks

  • Pay attention to authorization. Mastercard authorization on any credit card purchase is significant. If every credit card purchase is authorized, you, as the business owner, can take solace in knowing that the consumer’s bank is aware that the full amount of the purchase is being charged to the consumer’s account. If the consumer’s bank declines the card for any reason, the merchant can also “decline” the card by refusing to complete the transaction with that specific card. By doing this, the merchant can avoid any chargeback issues.
  • Don’t double-charge. Any duplicate transaction can result in a chargeback. This can happen when an online consumer accidentally clicks the “buy” button twice, or when an in-store employee accidentally swipes a card more than once while trying to ensure the success of the transaction. Mastercard encourages merchants to closely monitor their sales records so that they can catch these types of errors. If your business initiates refunds, you can avoid chargebacks altogether.
  • Check identification. Merchants can avoid in-store fraud by consistently asking for the consumer’s signature for credit card purchases, or requiring personal identification for larger purchases. Be sure to also create online identification protection for your business. This is a simple process, and can be as easy as verifying the cardholder’s address or asking for the additional three-digit code listed on the back of their card.
  • Conduct business honestly and state policies clearly. The easiest way for merchants to avoid Mastercard chargebacks is to be “up front” and transparent with consumers. Identify your return and refund policies, honor those policies fairly, fill orders carefully, ship products promptly and work proactively to keep these consumers happy. If you build, and maintain, a reputation as an honest, and trustworthy, business, consumers will be less likely to call their banks and file chargebacks. Instead, they’ll call you directly and try to work through the problem without getting their bank involved.
  • Stay in touch with your bank. The Mastercard chargeback reason codes, explanatory details and transaction or chargeback dates will be documented by your lending institution. Resolving chargeback disputes quickly is always in your best interest. When dealing with these issues, don’t delay or procrastinate. Contact your bank in a timely fashion to deal with these issues as soon as you can.  

Hire Additional Chargeback Support

If a merchant is having trouble with anything related to chargebacks, there are chargeback experts available to help them carefully work through these issues. Some of these issues can get complicated. For example, each Mastercard chargeback can involve time details, supporting evidence and explanation and options for re-presentment (the merchant’s opportunity to fight the chargeback). It’s important, and sometimes necessary, to enlist help so that you can understand each of these conditions (beyond just knowing the basic reason codes) for when your business must handle a dispute. Educate yourself, and your employees about chargeback management, and perhaps hire a professional service. Don’t leave your business unprotected or uninformed.


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