How to Manage ‘Late Presentment’ Chargebacks

Both Visa and MasterCard use special Reason Codes to designate chargebacks resulting from a late deposit of credit card transactions. Visa uses Reason Code 74 and its MasterCard’s equivalent is 4842.

Reason Codes 74 and 4842 are issued when an account number is blocked or closed and:

• The card issuer receives a transaction after the 30-day time frame, within which a transaction needs to be deposited or
• The card issuer receives a transaction more than seven calendar days after the transaction date and the transaction was completed with electronically recorded card information (whether card-read or key-entered).*

  
  * MasterCard transactions only.

Time frames exist to ensure that transactions are deposited in a way that will allow for timely payment processing and billing to the cardholders’ accounts. It is easy to imagine how a transaction, deposited a month after it was generated, will not be remembered by the cardholder, prompting him or her to file a dispute with the issuer. There are no remedies for chargebacks on payments deposited more than 181 days after the transaction date.

What causes these chargebacks? By far the biggest cause for Reason Code 74 and 4842 chargebacks is that the merchant does not deposit the transaction with its processor within the time frame specified in its merchant processing agreement.

How to manage such chargebacks? The time frame to respond to Reason Codes 74 and 4842 is 120 days. Your response will depend on the particular transaction circumstances and the actions you have taken (or not) so far:

• The transaction was deposited on time. If the payment was deposited within the required time frame, provide your processor with a copy of the sales receipt to be re-presented to the card issuer.
• The transaction was deposited late and the account was closed. If the transaction was not deposited within the specified time frame and the cardholder’s account was closed, there is no remedy and you should accept the chargeback. Do not issue a credit at this time, as the chargeback has already done that for you.
• The transaction was older than 181 days. If the transaction was deposited more than 181 days after the transaction date, even if the card account is not closed, there is no remedy and you should accept the chargeback.

How to prevent chargeback Reason Codes 74 and 4842? Preventing this type of chargebacks is entirely within your control and you should implement the following best practices:

• Deposit timing guidelines. Transactions should be deposited as soon as possible, preferably on the date of the transaction and not past the time frame, specified in your merchant processing agreement. Remember that for card-not-present transactions the transaction date is the date on which the product or service was shipped or provided and you are not allowed to deposit before that.
• Manual deposits of paper transaction receipts. If your business deposits paper receipts, which take more time to handle, make sure that they are deposited within the time frame specified in your merchant processing agreement.
• Transaction data capture terminals. Transaction data capture systems can be set up to automatically deposit your daily transaction batches at the end of the day, saving you time and substantially reducing, possibly eliminating, the probability of chargeback Reason Codes 74 and 4842.

The Associations require that card transactions are presented for clearing within one business day of the authorization date, which gives you yet another incentive to deposit transactions on time.

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