The life cycle of a credit card transaction doesn’t always end with its settlement and the deposit of the associated sales amount into the merchant’s account. Sometimes, the issuer or its cardholder may determine that, for a given reason (specified below), the transaction may be invalid. The issuer may then return the transaction to the acquirer as a “chargeback”, which will reverse the sale and the chargeback amount will be debited to the merchant and credited to the cardholder.
Each chargeback is identified by a code that specifies the reason why an issuer is disputing a transaction’s validity. Visa and MasterCard use different reason codes and often a code used by one of the Associations does not have an exact equivalent at the other. Visa’s reason codes are two-digit numbers, while MasterCard uses four-digit numbers. In this article I will review MasterCard’s chargeback cycle and reason codes.
MasterCard Chargeback Life Cycle
The table below identifies the transaction stages when the issuer initiates a chargeback.
||Acquirer submits the transaction to the issuer.
|Cardholder or issuer disputes the first presentment.
||Issuer may request a copy of the sales receipt to support or identify a potential chargeback. Note: Most chargebacks do not require a retrieval request.
||Issuer initiates a chargeback within the time frame applicable to the specific message reason.
Note: If an issuer receives a legible copy of the sales receipt through a second presentment for message reason code 4802 — Requested / Required Information Illegible or Missing, and after viewing the item for the first time determines that it has another right of chargeback for a different message reason code, the issuer must start the process again with a new chargeback.
|1442-450 (full amount)
1442-453 (partial amount)
||When applicable, the acquirer may process a second presentment within 45 calendar days of the chargeback date.
||1240-205 (full amount)
1240-282 (partial amount)
||When applicable, the issuer may initiate an arbitration chargeback within 45 calendar days of the date of the second presentment.
||1442-451 (full amount) 1442-454 (partial amount)
|Arbitration Case Filing
||The acquirer may file an arbitration case to MasterCard, for a decision on the dispute, within 45 calendar days of the date of the arbitration chargeback.
N / A
MasterCard Chargeback Reason Codes
An issuer can process a chargeback if it determines that a transaction can be charged back to the acquiring bank for one of the valid chargeback reasons specified in the table below.
||Requested Transaction Data Not Received
||Requested / Required Information Illegible or Missing
||Warning Bulletin File
||Requested / Required Authorization Not Obtained
||Account Number Not on File
||Transaction Amount Differs
||Card Not Valid or Expired
||No Cardholder Authorization
||Fraudulent Processing of Transaction
||Canceled Recurring Transaction
||Correct Transaction Currency Code Not Provided
||Requested / Required Authorization Not Obtained and Fraudulent Transaction
||Questionable Merchant Activity
||Credit Posted as Purchase
||Cardholder Dispute – Defective / Not As Described
||Cardholder Dispute – Not Elsewhere Classified (U.S. Region Only)
||Nonreceipt of Merchandise
||Card-Activated Telephone Transaction
||Services Not Rendered
||Credit Not Processed
||Counterfeit Transaction Magnetic Stripe POS Fraud
||Cardholder Does Not Recognize – Potential Fraud
||Chip Liability Shift
||Chip / PIN Liability Shift
An issuer can only process one first chargeback per presented transaction within the time frame applicable for the chosen chargeback reason code (typically 180 days). To generate a chargeback, the issuer must submit the First Chargeback / 1442 message with the applicable message reason.
MasterCard’s Corporate Purchasing Department Account Program does not have chargeback rights for the following message reason codes:
- 4835 — Card Not Valid or Expired.
- 4837 — No Cardholder Authorization.
- 4840 — Fraudulent Processing of Transactions.
- 4847 — Requested / Required Authorization Not Obtained and Fraudulent Transaction.
- 4862 — Counterfeit Transaction Magnetic Stripe POS Fraud.
- 4863 — Cardholder Does Not Recognize — Potential Fraud.
We have reviewed in detail the causes for chargebacks designated with some of the Reason Codes mentioned in this post and have suggested preventive measures in separate articles and will do so for the others in the near future.
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