A dispute (also known as a chargeback) occurs when a cardholder questions your payment with their card issuer. The issuer creates a formal dispute which immediately reverses the payment. The payment amount, along with a separate $25.00 dispute fee levied by the card network, is then deducted from your bank account.
There is a dispute resolution process through which you can respond and submit evidence to make your case that the payment was valid. If a dispute is upheld, the card issuer’s decision is final and the cardholder’s payment remains refunded.
Receiving A Dispute
When a dispute occurs, you will receive a notification of the disputed payment, including the relevant information about the payment being disputed and the reason the cardholder reported to the card issuer. A representative will also be in touch with you directly to walk you through the dispute resolution process, step-by-step, so that you can offer a response to challenge the dispute needed.
When you receive a dispute, you have the opportunity to respond to it and submit the appropriate evidence or accept it.
Disputes are an unfortunate part of accepting payments online, but they are not typically common. Disputes and the reasons for them (e.g., fraud) are ultimately your responsibility so you must take the appropriate actions to prevent and respond to disputes.
Please note: If the original payment was converted into your account’s default currency (e.g., a USD payment converted into CAD and deposited into your account), the disputed amount is converted back to the payment’s original currency (e.g., CAD is withdrawn from your account and converted back to USD).
When a cardholder disputes a payment you’ve processed, you are charged a $25.00 dispute fee by the payment processor. This amount is withdrawn from your account balance along with disputed amount.
If a dispute is won, accepted or unsuccessfully challenged (lost), you are still responsible for both the $25 dispute fee and the processing fee on the original payment. It’s important that you take steps to best prevent against disputes, and to submit as much information as possible in a response.
Responding to a Dispute
Our chargeback team will work with you to respond to any disputes. We'll guide you through the response submission process, step-by-step. You’ll be asked to provide different pieces of evidence and send us any necessary files, depending on the dispute type. All this works to increase the likelihood of a dispute being found in your favor.
If you receive a dispute, you may want to first get in touch with the customer and discuss it before you respond. It’s possible that they simply did not recognize or remember the transaction when they viewed their statement.
For disputes that are the result of such a misunderstanding, your customer can ask their card issuer to withdraw the dispute. It’s still important that you submit evidence to show that the payment was valid, however, and to ensure that the card issuer knows you are not accepting the dispute.
There is a limited period of time that disputes can be responded to (usually 7-21 days)—the amount of time available is provided within the dispute information. After that time has passed, no further responses or evidence can be submitted. Once you have submitted a response, it generally takes the card issuer 60-75 days to reach a final decision.
Once a dispute has been decided upon and has been closed, you'll be notified of the outcome via email.
Accepting a Dispute
You can accept a dispute, effectively agreeing with the cardholder that the dispute was valid for the reason given. Doing so marks the dispute as lost, and the disputed amount and fee is not returned to you.
You should always perform this action if you do not intend to respond and submit evidence. Although accepting disputes does not negatively affect your business any further, it should not be seen as an alternative to an effective refund or returns policy. Dispute activity is calculated based upon the disputes received, not won or lost, so dispute prevention is critical.
When a Customer Withdraws Their Dispute
Some customers may dispute a payment in error, not realizing it was legitimate. They can contact their card issuer and request the dispute be withdrawn. Even if your customer does this, the process involves a rigid series of formal communications between banking entities that still results in a long process.
Always provide evidence for every dispute you hope to have found in your favor, even if your customer has told you they are withdrawing the dispute. Some customers might not be able to, or might simply forget to do so. Providing suitable evidence for the dispute reason code is always the best way to ensure the dispute is reviewed appropriately during the active chargeback process. This way, if your customer cannot withdraw the dispute, you have submitted evidence suitable for the dispute reason, which may be sufficient to overturn the chargeback even if the cardholder does not withdraw. If no evidence is provided, you may lose the case even if your customer has been re-billed for the transaction.
Due to the strictly defined chargeback process, it’s common for a case to remain under review even when your customer tells you they’ve withdrawn the dispute and have already been re-billed by their card issuer.
Refunding a Customer on a Withdrawn Dispute
If your customer is willing to withdraw a dispute so that you can issue a refund, it can still take 60-75 days for the dispute to be closed and the funds returned. Only when this happens can a refund be made.
Have additional questions about the dispute process or need assistance in responding to a disputed charge? Reach out to us through the messenger below via email at email@example.com.