chargeback reason codes

Chargeback Reason Codes

With so many chargeback reason codes, it’s no wonder people can’t figure them out! There are so many reasons a consumer would initiate a chargeback, and chargeback reason codes cover just about all of them. However, it’s not always that simple – of course!

Chargeback Reason Codes – Macro View

It seems like everybody from Visa and Mastercard to Paypal and Stripe have their own reason codes, which makes this whole thing pretty messy. Here’s the simple version: reason codes denote why a consumer issued a chargeback.

There are plenty of reasons as to why this would happen, hence the many … many chargeback reason codes that exist today. However, the disputes themselves are still categorized by the issuing bank based on the card network issuing the card.

The main chargeback reasons look like this:

  • Malicious fraud
  • Friendly fraud
  • Damaged/Wrong product
  • Product not delivered
  • Canceled subscription
  • Charge not recognized
  • Duplicate charges

There are obviously more, but you get the idea – there are many reasons a consumer would go farther than a simple refund in requesting their money back. That’s the thing with chargebacks, they mostly bypass the merchant altogether, and the dispute is between the consumer’s bank and the merchant’s bank.

Companies like Midigator can step in and handle chargeback management for you, as they help prevent and fight chargebacks on a daily basis using technology and software automation. That’s the easy way, manual labor and dealing with these chargebacks yourself is the hard way.

Friendly Fraud

Of all the reasons listed above, we should discuss ‘friendly fraud’ in a bit more detail. It’s a complex term, and isn’t exactly a well-defined chargeback reason code, but stay with me. Think of friendly fraud as the way a consumer could fraud a merchant without realizing they’re committing fraud. Here’s an example:

  1. Joe Consumer signs up for a golf clothing subscription box.
  2. Joe gets the first delivery on his doorstep and loves its contents.
  3. The next month, same thing.
  4. However, the next two months of deliveries aren’t to his liking, so he’s upset. He tries to get the company on the phone to return the merchandise, but the company isn’t immediately responsive. Consumer Joe is fed up, and files a chargeback for all 4 months of the golf clothes.
  5. Joe’s bank give him the benefit of the doubt, sides with him, refunds his money, and reaches out to the merchant to put them on the hook for 4 months worth of subscription golf clothing.
  6. The golf clothes merchant now has to fight this chargeback (in the allotted time window, which is quick), provide compelling evidence that Joe did truly sign up for this subscription, and hope the bank sees it their way.

The point of this story is that, Joe wasn’t intentionally trying to harm the merchant, he just wasn’t happy with his product. So, rather than handle it calmly, cooly, and rationally – he filed a chargeback. Now, the merchant could possibly be out the cost of those goods AND the revenue he got from selling those products.

It’s fraud because Joe full-well knew he was buying the product, but charged it all back anyway. It wasn’t malicious fraud, but was fraud nonetheless.

Wrapping Up Chargeback Reason Codes

With so much to cover on chargeback reason codes, it’s hard to do it in a single blog post. However, the main takeaway here is that there are tons of reasons why a consumer would issue a chargeback – and it’s probably impossible to list them all. But knowing more about your business, knowing where the gaps could possibly be, and knowing everything about your customer journey will help you limit chargebacks on the whole.

Check back here often for more on chargeback reason codes and the world of chargebacks in general.

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