American Express Chargebacks And Prevention Tips

American Express is currently the third largest card network in the world behind Visa and Mastercard. Since they are their own network, they handle American Express chargebacks and disputes separately from Visa and Mastercard. What makes their case a little different is that they also operate as an issuing bank and in some cases, an acquirer. In this article, we will break down everything you need to know about American Express chargebacks and explain how we can assist with your chargeback issues.

What Are American Express Chargebacks?

An American Express chargeback is a process where you, as a cardholder, dispute a charge on your American Express card. It allows you to challenge a transaction if you believe it was incorrect or didn’t receive the goods or services you paid for. 

Card Members have up to 120 days from the transaction date to dispute the charge except for these dispute categories: 1. Goods/services not received. 2. Goods/services returned/canceled. 3. Redisputes. In these instances, the time frame can be extended accordingly.

How Are American Express Chargebacks Different?

The purpose of chargebacks on American Express cards mirrors that of other credit cards, although their process stands out due to its typically more streamlined nature. This distinction arises from American Express’s unique position as an issuing bank and a provider of payment-processing services to merchants, setting it apart from major competitors such as Visa and Mastercard.

Remaining true to its dual role as a card network and a bank, American Express can issue its branded cards directly to customers, known as “card members,” without relying on third-party issuers.

Here are a few quick points:

1. Longer Dispute Timeframe: American Express allows cardholders to dispute a charge within 120 days of the transaction date, compared to other payment methods’ 60-90-day timeframe.

2. Limited Dispute Filings: Cardholders are limited to two dispute filings per charge with American Express. This means they only have two opportunities to challenge a transaction, unlike other payment methods that may allow for multiple filings.

3. No Pre-Arbitration Process: Unlike other payment methods, American Express doesn’t have a pre-arbitration or arbitration process for merchants to fight chargebacks. 

American Express Chargeback Dispute Center

Like their competitors Visa and Mastercard, American Express recently revamped their protocols surrounding disputes and chargebacks. The primary objective behind this initiative was to enhance the experience for cardholders and merchants while minimizing instances of chargebacks.

The introduction of the American Express Dispute Center marks a significant departure from their previous system, addressing common issues and introducing a more transparent, expedited, and equitable dispute resolution process. Now, disputes involving Amex transactions are streamlined through a dedicated dispute resolution portal accessible on their official website.

This user-friendly portal facilitates direct communication between buyers and sellers, enabling them to efficiently address and resolve transaction-related issues. Within the Amex Dispute Center, cardholders can undertake various actions, including:

1. Reporting unauthorized transactions
2. Initiating billing disputes
3. Tracking the progress of billing disputes
4. Cancelling ongoing billing disputes

By offering more precise insights into the dispute process and integrating them into an intuitive, accessible platform, the American Express Dispute Center empowers cardholders to resolve issues more effectively. 

How To Prevent Amex Chargebacks

Although merchants might be more likely to secure an American Express chargeback reversal, the primary goal should still be to prevent them from occurring altogether.

Clear communication with customers is paramount in chargeback prevention. To achieve this, merchants should consider the following actions:

1. Ensure prominent and easily accessible customer service contact information across various touchpoints.
2. Provide clear disclosure of return or exchange policies and other terms of service before finalizing transactions.
3. Always request the Card Identification Number (CID), the four-digit security code on the card face, for card-not-present transactions.
4. Utilize the Automated Address Verification service (American Express’s version of AVS) to validate card member information.
5. Process refunds promptly when necessary and communicate the timeline for refund receipt to card members. While a refund may not be ideal, it’s preferable to a chargeback.

Amex Merchant Inquiry

Given Amex’s dual role as both a card network and an issuer, the company strives to maintain satisfaction among all parties involved. However, there may be instances where the interests of card members take precedence.

Usually, Amex opts for an immediate chargeback to the merchant without requiring further inquiry. However, there are occasional scenarios where Amex initiates a merchant inquiry to gather additional information. If such an inquiry is initiated, merchants have several options for responding:

1. Take no action, essentially admitting fault and consenting to the chargeback.
2. Issue a credit or refund, or provide evidence of a previously issued credit.
3. Offer a partial credit with supporting documentation justifying the reduced refund amount.
4. Present adequate evidence to validate the original transaction.

While merchants can disregard the inquiry, it is not advisable. 

American Express Inquiry Cycle

American Express employs a distinctive approach to managing disputes, characterized by several noteworthy aspects:

1. American Express takes a more hands-on approach, handling the majority of dispute resolution internally. While with most Mastercard and Visa disputes, the card brand typically acts merely as a mediator between the issuer and acquirer, American Express plays a more significant role in its chargeback process.
2. On occasions, American Express may initiate an inquiry and request additional information from merchants before proceeding with a chargeback.
3. Unlike other networks, there are no formal regulations or guidelines for pre-arbitration or second chargebacks in the American Express dispute process. Although the network limits cardholders to two disputes per transaction, there is a lack of written clarification regarding the procedures involved in a second dispute resolution round.

The following flowchart provides an overview of the American Express dispute process:

What are Amex Reason Codes?

Customers dispute transactions for various reasons, and American Express employs distinct codes to elucidate these reasons to merchants.

American Express chargeback reason codes are categorized into five groups: authorization, cardmember disputes, fraud, processing errors, and miscellaneous.

Each chargeback reason necessitates its own prevention techniques. Additionally, each code has specific compelling evidence requirements should merchants opt to contest them. Explore the categories below to discover American Express chargeback reason codes and access strategies to effectively manage each one.

Authorization Reason Codes

• A01 – Charge Amount Exceeds Authorization Amount
• A02 – No Valid Authorization
• A08 – Authorization Approval Expired

Cardmember Dispute Reason Codes

• 02 – Credit Not Processed
• C04 – Goods/Services Returned or Refused
• C05 – Goods/Services Canceled
• C08 – Goods/Services Not Received or Only Partially Received
• C14 – Paid by Other Means
• C18 – “No Show” or CARDeposit Cancelled
• C28 – Cancelled Recurring Billing
• C31 – Goods/Services Not as Described
• C32 – Goods/Services Damaged or Defective

Fraud Reason Codes

• F10 – Missing Imprint
• F24 – No Cardmember Authorization
• F29 – Card Not Present
• F30 – EMV Counterfeit
• F31 – EMV Lost/Stolen/Non-Received

Processing Error Reason Codes

• P01 – Unassigned Card Number
• P03 – Credit Processed as Charge
• P04 – Charge Processed as Credit
• P05 – Incorrect Charge Amount
• P07 – Late Submission 
• P08 – Duplicate Charge 
• P22 – Non-Matching Card Number
• P23 – Currency Discrepancy

Miscellaneous Reason Codes

• R03 – Insufficient Reply
• R13 – No Reply
• M01 – Chargeback Authorization

What are the Amex Chargeback Time Limits?

American Express allows cardholders to dispute a charge within 120 days of the transaction date, although certain dispute categories, such as goods not received, may have extended deadlines.

It’s important to note that cardholders are limited to two dispute filings per charge, with the second filing allowing them to submit additional evidence.

The merchant side has a 20-day window to respond to an American Express dispute inquiry. If the merchant accepts the chargeback or fails to respond within 20 days, the chargeback is granted. On the other hand, if the merchant provides sufficient evidence, a chargeback won’t be filed.

Industries American Express Doesn’t Work With

Restricted from accepting American Express cards as a mode of payment are certain industries, with eligibility determined by various factors, including the types of goods or services offered.

Outlined below are prohibited industry types:

1. Marijuana
2. CBD
3. Adult
4. Online dating
5. Unlicensed Telemedicine
6. Credit Repair
7. Hemp
8. Online gaming
9. Fantasy Sports
10. Firearms

Should you be a merchant in one of these industries, be sure you do not offer Amex, as it will result in an automatic chargeback without the chance of reversal.

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