Credit Card Processing Blog

Both Visa and MasterCard use special Reason Codes to designate chargebacks resulting in connection with recurring payment plans. The triggering point is usually when a card issuer receives a claim by a cardholder that the merchant processed a transaction after the cardholder requested cancellation or when the transaction amount is higher than the pre-authorized one. This Reason Code may also be issued if the merchant fails to notify the cardholder prior to processing a transaction, after agreeing to do so before each recurring payment. Visa uses Reason Code 41 and its MasterCard’s equivalent is 4841.

What causes these chargebacks? Chargeback Reason Codes 41 and 4841 may be caused by one of the following actions:

• The cardholder:
  • Did not authorize the charge.
  • Canceled the recurring plan.
  • Canceled the card account.
• The card issuer:
  • Has previously processed a chargeback on a transaction from the recurring plan at issue and the cardholder did not expressly renew the plan.
  • Canceled the card account.
• The merchant:
  • Was notified prior to processing the transaction that the customer’s card account was closed.
  • Exceeded the pre-authorized amount without notifying the cardholder in writing within 10 days of processing the transaction or did notify the customer but the customer requested that the account not be charged.

How to manage such chargebacks? The time frame to respond to Reason Codes 41 and 4841 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 canceled and credit was issued. If you issued a credit after your customer canceled a transaction, contact your processing bank and give them the details, including when the credit was processed.
• The transaction was canceled, but credit is not yet processed. If a customer canceled a payment but you failed to process the credit, there is no remedy and you should accept the chargeback. Do not process a credit at this time, as the chargeback has already done it for you.
• The transaction was not canceled. If you have no record that cancellation was requested you should still accept the chargeback, as the customer does not have to prove that he or she requested a transaction to be canceled.
• The transaction was canceled, but the services were used. If the customer claims that he or she was billed after requesting cancellation, but the bill was for services used between the date of the last billing statement and the cancellation date, provide to your processor some kind of supporting evidence.
• Final billing. If a cancellation request was received, but there is still a final payment to be made, contact your customer directly and request a payment.

How to prevent chargeback Reason Codes 41 and 4841? Many of these chargebacks can be prevented by implementing the following best practices:

• Customer cancellation requests. You should regularly check for cancellation requests and respond promptly. Inform the customer when his or her account was closed and request another form of payment if there is an outstanding balance.
• Credit cardholder account. Make sure that credits are processed promptly and notify customers immediately.
• The transaction exceeds the pre-authorized amount ranges. Always notify customers within 10 days of processing if the transaction amount will exceed the pre-authorized one. If there is a dispute, send a copy of the notification to your processor.
• Customer complaints. Always check and immediately address customer complaints. If unaddressed, complaints can easily deteriorate into chargebacks.

The only cause for a Reason Code 41 or 4841 chargeback that you cannot address is when a customer claims that he or she canceled their recurring plan, but you have no record of such a request. Visa and MasterCard have chosen to side with the cardholders in such cases and do not require any proof from them.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

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. Your 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.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Both Visa and MasterCard use special Reason Codes to designate chargebacks resulting when a merchant deposits the same credit card transaction with an issuer more than once. Visa uses Reason Code 82 and its MasterCard’s equivalent is 4834.

What causes these chargebacks? Chargeback Reason Codes 82 and 4834 may be caused by one of the following merchant actions:

• Entering the transaction information into the terminal more than once.
• Submitting the same batch to the processing bank more than once.
• Depositing with the processor both the merchant copy and the bank copy of the sales receipt.
• Depositing sales receipts for the same transaction with more than one processor.
• Creating two or more sales receipts for the same transaction.

How to manage such chargebacks? The time frame to respond to Reason Codes 82 and 4834 is 120 days. Your response will depend on the particular transaction circumstances and the actions you have taken (or not) so far:

• The sales receipts are not duplicates. If you did not submit duplicate sales receipts but receipts for separate transactions, provide your processor with copies of the receipts at issue. If you have any other supporting evidence that the transactions were indeed separate, send it along as well.
• The sales receipts are duplicates. If the sales receipts are in fact duplicates, there is no remedy and you should accept the chargeback. Do not process a credit at this time, as the chargeback has already performed this function. If you have identified the duplicate and processed a credit before receiving the chargeback, contact your processor and explain what happened. They will tell you what needs to be done and you should follow their instructions. Issuers typically do not issue chargebacks if their systems have detected that a credit has already been issued.

How to prevent chargeback Reason Codes 82 and 4834? These chargebacks are typically caused by errors in the entering or depositing transaction information and can be prevented by implementing the following best practices:

• Enter transaction information once. Make sure that you only enter the transaction information once.
• Void erroneous sales receipts. If, despite your best efforts, a transaction is entered twice, make sure to void the duplicate.
• Review sales receipts before depositing. The best preventive measure against chargeback Reason Codes 82 and 4834 is to review the transaction receipts before depositing them with your processor and make sure that no copies are included.
• Train your sales staff. Each member of your sales staff should understand the importance of avoiding entering the same transaction information multiple times and, when that happens, make sure the duplicates are voided.

Any time you receive a chargeback Reason Code 82 or 4834, you should follow up with the staff member who processed the transaction information and provide the necessary training to ensure that it does not happen again.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Visa uses chargeback Reason Code 80 to designate chargebacks resulting from processing transactions where either the account number or the transaction amount posted with the card issuer does not match the one shown on the sales receipt. MasterCard does not have a reason code that exactly matches Visa’s 80.

What causes these chargebacks? Reason Code 80 chargebacks are typically associated with key-entered transactions and are usually triggered by an incorrect data entry by the merchant.

How to manage such chargebacks? The time frame to respond to a chargeback Reason Code 80 is 120 days for both U.S. and international transactions. Your response to Reason Code 80 chargebacks will depend on the particular transaction circumstances and the actions you have taken (or not) so far.

• The transaction amount and account number is the same on the sales receipt and payment documents. If the transaction information was entered correctly, you will need to provide a copy of the sales receipt to your processing bank to be used in the re-presentment as supporting evidence.
• Either the transaction amount or account number differs. If the transaction data was entered incorrectly, there is no remedy and you should accept the chargeback. In a case of an incorrect account number, process a new transaction but do not issue a credit, as the chargeback has done that already. In a case of an incorrect amount, no action is needed, as the charged-back amount is the difference between the transaction amount and the correct one.

How to prevent chargeback Reason Codes 80? Preventing this type of chargebacks is entirely within your control and you should implement the following best practices:

• Card-present transactions. Reason Code 80 is typically issued for transactions processed in a card-present environment, where the card’s magnetic stripe has not been read, either because the point-of-sale (POS) terminal was not operational or the card was unreadable. Best card acceptance practices require you to take a manual imprint of the card on the front of the sales receipt. Your sales staff needs to be trained on when and how to do that and a manual imprinter needs to be readily available. Staff should also be trained to verify that the keyed and imprinted numbers are the same.
• MO / TO transactions. Reason Code 80 can also be issued for mail order or telephone order (MO / TO) transactions, where information is also key-entered, typically through virtual terminals. To minimize errors when orders are accepted over the telephone, sales staff should read the provided information back to the cardholder to ensure it is accurate.

Adequate training on best card acceptance practices is your best tool for preventing Reason Code 80 chargebacks. These are very simple procedures and there is absolutely no reason why they should not be followed. You can use our “Payment Card Acceptance Guide” as a training manual.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

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.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).