This guide discusses the essential details about chargeback time limits, who is expected to do what, and by when. We will also dig into each major card network and their specific regulations around chargeback time limits.
Are There a Time Limits for Chargebacks?
There is a limit for chargebacks on both sides of the transaction. All parties involved – the cardholder, merchant, and issuing bank, have time limits in which they must do their part. The cardholder has the greatest advantage in a chargeback situation, as the law provides them more time than anyone else in the transaction.
The Fair Credit Billing Act of 1974 established legislation to protect cardholders from potentially fraudulent merchants and banks. This act granted all cardholders at least 60 days to file a dispute after the transaction has been made. This rule has a few exceptions, but the standard is at least 60 days. Although the law requires 60 days, many card networks give customers even longer to file a dispute, which can pose some issues for merchants and banks involved in the transaction.
When do Chargebacks Happen?
Chargebacks typically occur when a cardholder sees a charge on their billing statement that is inaccurate, unfamiliar, or fraudulent. Instead of contacting the merchant to rectify the situation, customers can call their credit card company and dispute the charge. Unfortunately, this has become a simple process for customers and has contributed to increased chargeback fraud.
When a cardholder files a chargeback to dispute a transaction, the issuing bank must investigate and decide. The bank usually gives the cardholder their money back and removes it from the merchant’s bank account. This is due to a culmination of other issues, including a lack of pushback from merchants and difficulty on the part of the bank to decipher legitimate claims from fraudulent ones.
What is the Time Limit for Filing a Chargeback?
When cardholders see a charge on their billing statement that they disagree with, they have at least 60 days to file a dispute with their bank. Most credit card companies and issuing banks give cardholders even longer than what the law requires. Here is a breakdown of each credit card and their time limit for filing a chargeback:
Visa: Cardholders must file their dispute in 120 days or less. In certain situations, Visa lowers this time limit to 75 days. This shorter window includes lost/stolen cards and authorization errors.
MasterCard: The general expectation for MasterCard holders is 120 days or less. However, exceptions are made in extreme situations and can be as little as 45 days or as long as a full calendar year.
American Express: Cardholders have 120 days from the transaction date to file a dispute. However, if the dispute involves damaged or defective goods, the cardholder has 120 days from the receipt of those goods.
Discover: Discover users are encouraged to file disputes within 120 days of the transaction, but it’s not required. Instead, Discover chooses to review chargeback filings on a case-by-case basis.
How Long do Merchants Have to Respond to Chargebacks?
As you might’ve guessed, each card network also has its own set of parameters for merchants to respond to disputes. In an effort to protect consumers from fraudulent merchants, these time limits are much shorter. Read below to learn more about the expectations for you as a merchant. Additional information can be found on each card network’s website, but these are the basics that you need to know.
What are the Visa Chargeback Time Limits?
Time limits for chargebacks on a Visa card start the day after the transaction was made. In most cases, Visa allows merchants 30 days in which to respond to a chargeback. However, if you plan to file for arbitration, the time limit becomes 10 days.
During each phase of the dispute process, the parties have 30 days to respond. This includes the issuer and the acquirer.
What are the MasterCard Chargeback Time Limits?
Mastercard allows merchants and acquirers 45 days to respond during each step in the chargeback process. For example, a merchant has 45 days to file representment, and the acquirer has another 45 days from then to appeal it, and so on. It’s important to note that merchants only have 18 days to respond to a request for information concerning a dispute.
What are the American Express Chargeback Time Limits?
When a cardholder files a chargeback with American Express, merchants have 20 days to respond to the inquiry. The 20-day time limit requires either acceptance of the chargeback, or evidence from the merchant that the charge was legitimate. AMEX usually refunds the money to the cardholder and debits it from the merchant’s account. There’s not much you can do as a merchant to appeal a chargeback once the bank has deemed it legitimate.
What are the Discover Chargeback Time Limits?
When Discover cardholders file a chargeback, merchants have 20 days to respond. If the merchant responds with representment and it is declined, they have 30 days to appeal that decision. Additionally, if the merchant wishes to move the dispute to arbitration, the limit for that request is 15 days from the transaction date.
How to Fight Chargebacks Efficiently
Since time is not on your side as a merchant, it’s essential to consider your process for fighting chargebacks. Having your accounting systems in place is an excellent first step. Ensuring receipts, signatures, and authentication for each purchase can drastically reduce your likelihood of losing revenue to chargebacks.
If you don’t have a dedicated anti-fraud team in your business, consider outsourcing it. Handling disputes in-house without a team is a good way to become overwhelmed quickly. Outsourcing this process can keep your timelines moving forward without additional stress or headaches.