Behind every chargeback, there is a reason. Since chargebacks don’t just appear without a specific reason, it’s important for merchants to understand why they are receiving chargebacks, so that they can learn how to prevent them.
During the chargeback process, the issuer gives the merchant a reason code, which details the exact reason for the chargeback. There are a variety of different reason codes and they also differ, based on the card network.
While the card networks have different reason code systems, the meaning behind the reason codes is similar.
Mastercard uses four digit numbers as their reason codes. Additionally, they have sorted their reason codes into two distinct categories: Active Chargeback Reason Codes and Fraud Related Reason Codes. These reason codes are relatively general, so that it’s easy to sort all the incoming chargebacks. For instance, some of the codes represent an Authorization Related Chargeback, a Cardholder Dispute, the Fraudulent Processing of Transactions or Questionable Merchant Activity.
Visa, on the other hand, uses two digit numbers for their reason codes. In stark contrast to Mastercard, Visa doesn’t sort their codes into different categories. Some of the common Visa reason codes include Services Not Provided or Merchandise Not Received, Canceled Recurring Transaction and Counterfeit Transactions.
While these reason codes give merchants insight into the chargeback and the reasoning behind it, they don’t do anything on their own to prevent, or limit, these chargebacks. If they want to limit their chargebacks, merchants should interpret them and figure out what is causing them the most trouble.
It’s always better to take a proactive approach to this task, which means using all the tools at your disposal, including the reason codes and other resources, like a consumer authentication solution. Cardinal Consumer Authentication (CCA), our rules-based solution that leverages 3-D Secure, can help merchants prevent fraud by utilizing a flexible rules-based approach that can keep fraudsters at bay. Less fraud always means fewer chargebacks. With One Connection to Cardinal, we can Drive your Digital Commerce.