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Understanding Mastercard chargeback reason codes

May 16, 2022

All types of chargebacks result in lost revenue for merchants. However these can occur in different ways. Therefore world card schemes make distinctions between the reasons for chargebacks by creating various reason codes.

A chargeback reason code is a 2-to-4-digit alphanumeric code provided by the issuing bank involved in a chargeback, which identifies the reason for the dispute. Each of the major card brands (Mastercard, Visa and others) use their own system of reason codes.

To prevent as well as successfully respond to chargebacks, online merchants need a solid understanding of chargeback reason codes. Mastercard uses four-digit reason codes, which are divided into four categories: Processing, Fraud, Authorization and Customer disputes.

Reason code
Category What it means
4834 Transaction Amount Differs The cardholder claims that amount they agreed to pay differs from the amount charged
4834 Late Presentment The presentation for the transaction was made after the cardholder’s account has been permanently closed
4834 Point-of-Interaction Currency Conversion The cardholder did not get the option to pick a currency or POI currency conversion was incorrect
4834 Duplication/Paid by Other Means The payment was processed more than once or the customer’s card was charged after a different payment method was used
4834 Loss, Theft, or Damages The cardholder claims that the merchant included a charge for loss, theft or damage up front, before the services had even been used
4837 No Cardholder Authorization The cardholder claims the transaction was not authorised
4849 Questionable Merchant Activity You are listed in a Mastercard Announcement under the Global Merchant Audit Program
4808 Authorization-Related Chargeback A cardholder-activated terminal was used to process a transaction and the transaction amount exceed the acceptable limit or the card was not valid at the time of the transaction
4808 Required Authorization Not Obtained Authorisation was required, but not properly obtained
4808 Expired Chargeback Protection Period The transaction was settled after the deadline had expired and the cardholder’s account is no longer in good standing
4808 Multiple Authorization Requests A Card-Not-Present transaction was declined by the issuer, but subsequently approved through Stand-In processing or X-Code
4853 Cardholder Dispute of a Recurring Transaction The cardholder claims that the merchant did not disclose that the transaction was recurring or continued to bill after the request to cancel
4853 Goods or Services Not Provided The purchased good and services were not received
4853 Addendum Dispute The cardholder engaged in a valid transaction with the merchant, then a subsequent transaction occurred with that same merchant without the cardholder’s consent
4853 Credit Not Processed The merchant did not respond to the return or the cancellation of goods or services or failed to disclose the Refund Policy
4853 Goods/Services not as Described or Defective Goods or services provided didn’t match the description provided at the time of purchase, or were defective, or the quality wasn’t substandard
4853 Digital Goods $25 or less The merchant failed to put adequate purchase controls to the cardholder’s account with their card information stored and this resulted in the unwanted or unauthorised purchase of digital goods (software, books, music, games) valued not more than $25
4853 Counterfeit Goods The cardholder claims that the received goods were counterfeit
4853 Transaction Did Not Complete The cardholder claims the dispute transaction failed to complete and they never used the goods or services
4853 Credit Posted as a Purchase The transaction was processed as a sale instead of a credit

When clients request a chargeback from their bank, the case details will be forwarded to FMPay. If the merchant does not respond to FMPay’s request for information, the chargeback will be granted and the merchant will incur the monetary loss. If the merchant provides a response and has compelling evidence showing that the charge is valid, then the claim is back in the hands of the customer's card issuer. If the card issuer then decides that the provided evidence is enough to disprove the cardholder's dispute, the merchant wins the chargeback, and the funds are returned back to the merchant.

When merchants win a chargeback dispute, they will partially recover the transaction cost. However, all chargebacks – whether they have been won, lost or remain undisputed – negatively affect a merchant’s chargeback-to-transaction ratio. Too many chargebacks in a short period of time will have multiple consequences, including monetary penalties by FMPay and Mastercard, and will eventually lead to the closure of the merchant’s account.

Most card issuers give cardholders 120 days to dispute a charge. As an FMPay merchant, you will have 7 business days to respond to chargebacks. To successfully challenge chargebacks, it would be advisable to collect as much customer, payment and inventory data as possible. Later you can use this as evidence that the product or service has been delivered.

According to Mastercard, the merchant’s compelling evidence should include one of the following:

  1. Explanation and documentation to refute the cardholder’s claim;
  2. Proof that the chargeback is invalid because it does not adhere to Mastercard’s requirements;
  3. Proof you have already refunded the transaction and credited the cardholder’s account;
  4. Proof the cardholder no longer wishes to dispute the transaction.

Understanding chargeback reason codes is one of the most essential parts of effective chargeback management. By knowing the reasons for your chargebacks, you can identify certain patterns, determine the root causes and take steps to modify your operations to avoid future chargebacks of the same type.

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