How to Manage ‘Paid by Other Means’ Chargebacks

Visa uses chargeback Reason Code 86 to designate chargebacks resulting when the card issuer receives a written complaint from the cardholder stating that the payment for the transaction at issue was made by other means, not with the credit card that was charged. MasterCard does not have a reason code that exactly matches Visa’s 86.

What causes these chargebacks? Reason Code 86 chargebacks typically occur when the cardholder initially submits a card to pay for the transaction, but then decides to use another payment method. The merchant then fails to void the card transaction and deposits the sales receipt, in addition to the actual one.

How to manage such chargebacks? The time frame to respond to a chargeback Reason Code 86 is 120 days for both U.S. and international transactions.?áYour response will depend on the particular transaction circumstances and the actions you have taken (or not) so far:

• The card was the only form of payment presented by the customer. If the card was in fact the only form of payment that was processed, provide your processing bank with the sales records and any other supporting evidence that you may have.
• Another form of payment was presented by the customer, in addition to the card. If you deposited a card sales receipt after another form of payment was used, there is no remedy and you should accept the chargeback. Do not issue a credit at this time, as the chargeback has already performed this function. If you have issued a credit, contact your processor and explain what happened. Provide a copy of the credit transaction, if required.

How to prevent chargeback Reason Codes 86? As these chargebacks are caused solely by a failure to void card transactions where payments were made by other means, preventing them is entirely within your control. Consider implementing the following preventive measures:

• Develop procedures for voiding card transactions, after payments are made in other ways. If, after swiping her card, your customer changes her mind and decides to pay in cash, by check, or even using another card, you must void the original card transaction. This is all you need to do to prevent a chargeback.
• Train your point-of sale staff. Your sales staff should be trained on both when and how to void a card transaction. A good policy would be to place a step-by-step guide on voiding transactions near the register to help newer members of your sales staff.

If you follow the suggestions above, you will greatly minimize or may even completely eliminate Reason Code 86 chargebacks. If you still can’t get the desired results, however, you should start reviewing each batch of transaction receipts prior to deposit to ensure that no single order was paid multiple times.

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