Mastercard is the second largest card brand in the world, with nearly 2 billion total cards in circulation. If you’re a merchant accepting Mastercard, you need to have measures to deal with Mastercard chargebacks.
As chargeback rules vary from card brand to card brand, we’ve created this guide to help you understand everything you need to know about Mastercard chargebacks.
When a chargeback occurs, the disputed amount is returned to the cardholder, and you, as the merchant, are notified with a reason code.
To resolve the chargeback, refer to the Mastercard Chargeback Guide and submit a rebuttal letter with supporting evidence.
Mastercard then evaluates the documentation and decides in favor of you or the cardholder.
It’s important to understand that excessive chargebacks can have serious consequences for merchants, including penalties under the Mastercard Excessive Chargeback Program.
- Multiple phases are involved in the Mastercard chargeback process
- Excessive chargebacks can have consequences for merchants, including penalties and higher fees
- Merchants should familiarize themselves with network guidelines and best practices to prevent and manage chargebacks
- Outsourcing chargeback management to a reliable firm can help reduce chargeback rates and recover revenue
- The MasterCard threshold for chargebacks is 1.5% to avoid penalties.
- CB-ALERT can help you significantly reduce chargebacks through chargeback management and prevention alerts.
Mastercard Chargeback Process
The Mastercard chargeback process consists of several vital steps that merchants should be aware of:
1. The merchant requests additional information After a customer disputes a charge. Here, they can provide evidence to support the legitimacy of the charge.
2. If the chargeback is not resolved at this stage, it progresses to the first chargeback phase. During this phase, the cardholder’s account is credited, and the merchant is notified with a reason code.
3. The merchant then has the option to initiate a second presentment. This involves providing additional evidence to dispute the chargeback and prove the transaction’s validity.
4. The case may proceed to pre-arbitration if the second presentment is unsuccessful. In this phase, Mastercard makes the final decision on the chargeback.
In the initial transaction, the charge is submitted to the bank and credited to the merchant’s account. Subsequently, the cardholder raises a dispute with their bank regarding the charge.
Request For Additional Information
Should the cardholder fail to recognize a charge or disagree with the billed amount, the bank might forward a request for additional information to the merchant. It’s worth noting that this step is discretionary, and many banks may bypass it, opting to initiate a chargeback.
These requests may come from the card issuer or the chargeback management team. Responding promptly and providing all the necessary documentation and evidence to support your case is crucial.
During the first stage of the chargeback process, merchants may receive a notification requesting additional information to support their case. This notification, often called the First Chargeback, is a crucial step.
If the merchant fails to respond to a request for information, or if the bank opts not to send one, or if the provided information doesn’t lead to a resolution, the dispute will progress to a chargeback.
This results in the transaction being refunded to the cardholder and debited from the merchant’s account. Should the merchant accept the chargeback, the dispute concludes at this point.
The merchant can present their case to the bank to contest the chargeback. For the bank to consider the merchant’s representation and overturn the chargeback, they must provide evidence demonstrating its invalidity.
If the issuer doesn’t find the merchant’s evidence convincing enough to reverse the chargeback, or if the cardholder presents new evidence supporting their case, the case may go to pre-arbitration. The merchant can either accept that they lost the dispute or decline the pre-arbitration, in which case the issuer has the option to either reverse the chargeback or go to arbitration.
When a case proceeds to arbitration, Mastercard will intervene, assess the evidence, and render a final verdict on the dispute. The party that doesn’t prevail will incur fees amounting to $500. The merchant can concede the case at any point before Mastercard decides, resulting in reduced fees of $300.
Mastercard Chargeback Time Limits
The golden rule with Mastercard chargebacks is 45 days. That’s the window they give you to fire back when a chargeback comes your way.
Keeping the paperwork is key. Merchants need to hang on to anything related to Mastercard transactions, just in case they need it for their defense.
Conversely, cardholders get a roomy timeframe to file a chargeback. Most of the time, they’ve got a solid 120 days after the transaction. But they can stretch it out to a staggering 540 days later for certain recurring billings.
But here’s the scoop for merchants and banks – the deadlines aren’t relatively as cushy:
- Merchants get 18 days to dish out info when asked.
- They’ve got another 45 days in their pocket for round two.
- Issuers have 45 days to throw down a pre-arbitration.
- Merchants get 30 days to give a thumbs up or down on that pre-arbitration.
- Issuers can bring out the big guns, the arbitration, but not a day earlier than 30 days or later than 75 days after the second round.
How To Fight Mastercard Chargebacks?
If you want to fight a chargeback, look no further than our team of experts at CB-ALERT. However, if you want an explanation, here’s a quick rundown on fighting Mastercard chargebacks.
1. Gather and analyze evidence: Carefully review the chargeback reason code and collect all relevant transaction documents, such as order details, customer communication, and delivery confirmation. This evidence will help you build a strong case to prove that the transaction was legitimate and the cardholder received the goods or services.
2.Prepare a comprehensive rebuttal letter: Clearly outline your arguments and explain why the chargeback is invalid. Include all supporting documentation and reference Mastercard’s chargeback regulations to strengthen your position. Be concise, precise, and persuasive in your writing.
3. Submit the rebuttal to the acquirer: Send your well-prepared rebuttal letter and evidence to your acquirer, who will forward it to Mastercard for evaluation. Ensure that you meet the deadline for submitting the rebuttal to avoid losing your chance to dispute the chargeback.
Are you looking to prevent Mastercard chargebacks altogether?
- Leverage Advanced Authentication: Incorporate state-of-the-art tools like 3DS2 authentication, RDR, Ethoca alerts, and Verifi alerts to fortify your defenses against fraudulent activities.
- Optimize Merchant Descriptions: Ensure your company’s name on credit card statements closely aligns with your online storefront for easy recognition. This clarity minimizes confusion and lowers the chances of chargebacks.
- Partner with CB-ALERT: Collaborate with CB-ALERT to proactively identify and deter fraudsters, reducing the likelihood of chargebacks.
- Ensure Transparent Transaction Details: Clearly communicate transaction specifics, including purchase details, pricing, and associated fees, to prevent chargebacks arising from customer misunderstandings.
- Prioritize Refunds: Offering refunds is often a more cost-effective approach than dealing with chargebacks. It also increases the likelihood of maintaining customer loyalty.
- Provide 24/7 Customer Support: Swift and satisfactory resolution of customer issues is pivotal in preventing disputes from escalating into chargebacks.
- Utilize Clear Billing Descriptors: Ensure the billing descriptor on your customer’s credit card statement is easily understandable, reducing confusion and the likelihood of chargebacks.
- Maintain Accurate Records: Keep meticulous records of all transactions, including customer contact details, order specifics, and communication. This documentation is invaluable in chargeback disputes.
- Implement Chargeback Monitoring Systems: Leverage alert systems to address and manage dispute cases promptly.
- Scrutinize Irregular Orders: Exercise vigilance with orders that deviate from the norm, such as transactions from unfamiliar countries or significantly higher amounts. Investigate these cases to ensure accuracy and security.
Mastercard Excessive Chargeback Program
Mastercard takes a firm stand against the growing issue of rampant chargebacks, recognizing the harm they can cause to the world of card payments. As a result, they’ve crafted a multi-tier program to step in when merchants accumulate an excessive number of chargebacks.
The way they figure this out is by calculating your chargeback ratio. It’s pretty straightforward; they divide the number of chargebacks you’ve received in the current month by the total number of Mastercard transactions you processed in the previous month.
Those acquiring banks are the ones who keep an eye on and follow up on their merchants’ chargeback ratios.
Here’s how it breaks down for the merchants:
- Managing It In-House or Elsewhere: If a merchant wraps up a month with at least 100 chargebacks and a chargeback ratio of 1.5% or more, they get labeled as Excessive Chargeback Merchants (ECM). And if they kick it up a notch with a ratio of 3% or more and a minimum of 300 chargebacks, they get the heavyweight title of High Excessive Chargeback Merchant (HECM).
- The Warning and Penalties: The first time a merchant lands in either of these categories, it’s like a friendly warning shot. But if they break those thresholds again within three months, that’s when the penalties come into play.
Our firm advice is to work with chargeback prevention specialists to avoid Mastercard and Visa chargebacks.
Chargeback Management Company To Help With Chargebacks
Managing chargebacks can be a time-consuming and complex process. It can especially be challenging for merchants who need more resources and expertise in this area.
By outsourcing this task to a reliable chargeback management firm like ourselves, you can significantly reduce your chargeback rates and recover lost revenue. These professionals have in-depth industry knowledge, access to valuable resources, and established relationships with key players.
If you want to reduce your chargebacks with Mastercard, fill out our application below.