Transaction Disputes: All You Need To Know

Transaction disputes are one of the worst things a merchant can face when trying to build a solid business. These claims are not only tiring and frustrating to manage but can also be very costly. Not all claims are legitimate, which makes the whole phenomenon even more tricky to deal with. It’s essential to understand what transaction disputes are, so you can handle them if push comes to shove. Let’s take a look at what these transaction disputes are, why they are made, and what you can do about them.

What Are Transaction Disputes?

When a customer purchases something from you, they can later get in touch with their bank and demand their money back. This is essentially what a transaction dispute is. Customers can initiate it by contacting their bank and telling them they did not authorize one of the transactions on their card.

One important thing to note is that transaction disputes are not the same thing as a chargeback. They are the first step in initiating a chargeback, though. If a claim is made and the issuing bank deems it acceptable, it turns into a chargeback.

Why Do Customers Dispute Their Transactions?

There can be many reasons for a customer to dispute one or more of their transactions. Here are some:

• The customer claims that they never received the goods.
• The product that the customer received is materially different from what they expected to get.
• The customer does not remember making such a transaction and cannot recognize it on their bank statement.
• The customer claims that they never authorized the purchase, and it was placed with stolen card information.
• The customer wants to commit fraud by making such a claim to get free money. Fraudulent claims can also be motivated by other reasons, such as changing their mind after making the purchase or not liking the product.

How Do Transaction Disputes Work?

If you want to know how transaction disputes work, here are the basic steps of the process that you should be aware of:

1. Customers do not like the product or have another issue with the transaction.
2. They contact their bank and tell them that the transaction is unauthorized.
3. The issuing bank reviews the claim and decides how to proceed.
4. The issuer then checks if the merchant is part of an order validation platform. If that’s the case, the bank asks for information for clarity on the case. This can often help with stopping the process at this stage.
5. The issuer also checks if the merchant is part of a prevention alerts network. If yes, then the merchant is notified of the claim and has the chance to talk directly to the customer attempting to resolve the case before it goes any further.
6. If the merchant is not part of any of the programs mentioned above, the issuing bank initiates the chargeback process.

How Long Do Transaction Disputes Take?

How long transaction disputes take depends on some factors like who the merchant is and what kind of claim is made. Usually, when a customer makes a dispute, you have 7 days to respond to the issuing bank about whether you accept it or want to fight it. After that, the chargeback process begins, which takes a much longer time.

Overall, the whole transaction disputes process can take up to 90 days if the payment was made with a debit card and up to 60 days if it was made with a credit card. If the customer decides to contact you directly about their problem, you may be able to come to an agreement and end the problem in a few days.

What Are the Problems with Transaction Disputes?

There are a number of problems with the transaction disputes process. Here are some:

• Customers often abuse the process, and there’s not much that merchants can do about it.
• Merchants have a very limited time to respond to the bank after a claim is filed. Failure to respond in time leads to the customer winning the case automatically.
• Banks usually don’t contact merchants to hear their side of the story and take the customer’s story as accurate.
• Many merchants who do not use any chargeback prevention platforms are unable to fight transaction disputes, especially if they do not have the capital to spend on such a long process.

Managing Transaction Disputes

Here are some tips you can use to start managing transaction disputes and hopefully maintaining your company’s ROI in the process:

• Make sure your customers can get in touch with you. If they see an easy way to contact you, they’ll be more encouraged to do so rather than going to their bank if there’s a problem with their product. This helps you settle the case before it even gets started.
• If a dispute is filed, you need to have all the evidence relating to the disputed transaction. This information will help you build a strong case for yourself.
• For card-not-present transactions, make sure to ask for information like the CVV code on the customer’s card and their ZIP code when they are making payments.
• Confirming the placed order by calling the customer’s phone number is also a good idea to make sure that their card is not being used by someone else.

These simple steps can help you not only in managing transaction disputes once they arise but also in preventing them from ever taking place at all.

Abuse of the Contestation Process

Many cardholders abuse this process, as committing fraud is very easy this way. Here are some ways in which customers abuse the process:

• They don’t like the product and have run out of the refund period.
• One of their family members ordered the product from their card.
• They bought the product just to initiate a chargeback later to get their money back.
• They have damaged the product and want a refund.

Chase Transaction Disputes

Chase transaction disputes work the same way as with most other banks. First, the bank suggests that customers review the details of the charge they have an issue with. It allows them to access these details and then suggests that they contact the merchant directly first.

The good thing about Chase transaction disputes is that the bank tries to educate its users about what they should do before contacting the bank, trying to resolve the issue with the merchant, as that can be done in just a few days.

Disputed Transactions vs. Chargebacks

Transaction disputes and chargebacks are related but refer to different stages and processes in the resolution of payment-related issues. A transaction dispute occurs when a customer raises a concern or disagreement regarding a specific transaction with a merchant. This can include issues such as billing errors, incorrect amounts charged, defective products, delivery problems, or unauthorized transactions. 

A chargeback is a formal dispute initiated by the customer with their bank or card issuer. It typically occurs after a transaction dispute has been escalated, and the customer’s concerns were not satisfactorily addressed. The bank or card issuer investigates the claim, collects evidence from both parties (merchant and customer), and makes a decision regarding the validity of the dispute. If the chargeback is deemed valid, the funds are reversed from the merchant’s account and returned to the customer.

Can a Cardholder’s Dispute Claim Be Rejected by a Bank?

Banks reserve the right to reject a cardholder’s dispute. The most common reasons banks reject cardholders’ disputes include:

• The Credit Card Used  – Banks may have different rules and policies regarding dispute resolution for different types of credit cards. Some cards may offer additional protection or have specific terms and conditions that apply to transaction disputes for example, you typically need to raise a chargeback within 120 days. Banks may deny a dispute if it falls outside the coverage or specific rules associated with the card used.
• The Cause of the Dispute – For a dispute to be valid, there must be a legitimate reason or cause. Insufficient reasons for a transaction dispute include situations where the cardholder simply changed their mind about a purchase, did not read the product description properly, or made a mistake during the checkout process. 
• The Product Was Purchased Abroad – When a cardholder makes a purchase abroad, there may be additional complexities involved in resolving transaction disputes. Banks may consider factors such as local laws, different consumer protection regulations, and challenges in verifying transaction details. In some cases, the bank may require additional evidence or documentation to evaluate the validity of the dispute. 
• The Claim of the Cardholder Appears Suspicious – Banks employ various fraud detection measures to identify suspicious or fraudulent transaction disputes. Some common signs of fraudulent claims include:
  • Inconsistent or contradictory information provided by the cardholder 
  • Frequent or repetitive disputes from the same cardholder 
  • A sudden increase in dispute activity from the cardholder 
  • Lack of cooperation or refusal to provide requested evidence or documentation 
  • Unusual patterns of purchase behavior or high-value transactions 

Specific policies and procedures for dispute resolution may vary among banks and card issuers. Cardholders should familiarize themselves with the terms and conditions of their credit cards and provide accurate and detailed information when filing a dispute to ensure a fair evaluation by the bank.

How to Avoid Transaction Disputes

Merchants make several mistakes during transaction disputes that hinder their ability to successfully resolve the issue. Here are the most common mistakes and some tips to help merchants reduce their chance of being involved in transaction disputes:

• Poor Customer Communication: Lack of timely and effective communication with customers can exacerbate disputes. Merchants should respond promptly to customer inquiries, concerns, or complaints related to transactions. 
• Insufficient Documentation: Merchants should keep thorough records to provide evidence and support their case. This documentation can include order details, invoices, tracking numbers, proof of delivery, and any communication with the customer.
• Inadequate Product/Service Descriptions: Unclear or misleading product or service descriptions can lead to misunderstandings and disputes. Merchants should ensure that their descriptions reflect the actual features or qualities of the product or service. 
• Ignoring Chargeback Notifications: Failing to promptly respond to chargeback notifications can result in missed opportunities to present evidence or dispute the claim. 
• Lack of Fraud Prevention Measures: Insufficient fraud prevention measures can leave merchants vulnerable to fraudulent chargebacks. Implementing security measures such as address verification, CVV verification, and using fraud detection tools can help minimize the risk of fraudulent transactions and chargebacks.
• Inadequate Refund and Return Policies: Unclear or unfair refund and return policies can lead to customer frustration and disputes. Merchants should clearly communicate their policies, including deadlines, eligibility criteria, and procedures for refunds or returns. 
• Poor Packaging and Shipping Practices: Inadequate packaging and shipping practices can result in damaged or lost items, leading to disputes. Providing tracking information and requiring signatures upon delivery can help minimize disputes.

To avoid transaction disputes, merchants should take these proactive steps:

• Providing accurate and detailed product descriptions.
• Ensuring transparent pricing and refund policies.
• Implementing strong fraud prevention measures.
• Maintaining clear and timely communication with customers.
• Keeping thorough documentation of transactions and interactions.
• Delivering products promptly and using reliable shipping methods.
• Resolving customer concerns or complaints promptly and amicably.
• By focusing on these areas, merchants can enhance customer satisfaction, reduce the likelihood of disputes, and handle any potential disputes more effectively.

Get Help From Chargebackhit

To save your ROI and reputation, you can get in touch with us and see how Chargebackhit can help in your case. We are a reputable company that offers chargeback prevention and resolution services to merchants. We offer highly useful alerts to merchants when a customer disputes a transaction, by using both Verifi and Ethoca networks.

This helps businesses resolve the issue directly with their customer rather than having to go through the whole chargeback process. Chargebackhit also helps merchants win such cases by automatic resolution, so you don’t have to worry about pretty much anything.

In the case of friendly fraud, Chargebackhit is equipped to fight for reclaiming your revenue as well. So, the company offers a complete package of services to its users, from prevention to resolution. And all through the process, you as the merchant do not have to worry too much and can dedicate yourself to your business instead.