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Types of Chargebacks

Chargebacks can be confusing, but understanding the different types can help you protect your business and your bottom line. Here's a breakdown of what you might encounter:

Table of Contents

  1. Retrieval Request (Discover) or Inquiry (American Express):
  2. Chargeback
  3. Pre-Arbitration
  4. PIN Debit Chargeback

 

1) Retrieval Request (Discover) or Inquiry (American Express):

  • What it is: This is essentially a "heads-up" or a request for more information about a transaction from your customer's bank. It's their way of trying to resolve a customer's query before it becomes a full-blown dispute.
  • How you'll be notified: A notice will be sent to the mailing address on file. If fax delivery has been enabled for your account, the notice will also be sent by fax.
  • Impact on your funds: No money has been debited from your account at this stage.
  • Your action is required: Don't ignore these! For Discover Retrieval Requests and American Express Inquiries, you absolutely must respond. This is your best chance to resolve the issue early.
  • What happens if you don't respond: Failure to provide the requested information within the ten day time period will lead to the dispute escalating into a formal chargeback. At that point, the transaction amount will be debited from your account, and you'll lose your opportunity to reverse it.

 

2) Chargeback

  • What it is: This is a formal dispute initiated by a customer against a transaction. They are officially challenging the charge.
  • How you'll be notified: Chargebacks can be viewed in the Chargebacks Report. Merchants may also receive chargeback notifications by email if enabled.
  • Impact on your funds: When a chargeback occurs, the transaction amount will be debited from your merchant account immediately.
  • Your opportunity to fight: Even though funds are debited, you still have a chance to respond and present your evidence (called "compelling evidence") to dispute the chargeback and potentially recover your funds.

 

3) Pre-Arbitration

  • What it is: Consider this your final warning before a dispute moves to the costly and formal arbitration process. It means the customer's bank is still pursuing the dispute, and you have one last opportunity to resolve it without going to arbitration.
  • How you'll be notified: A notice will be sent to the mailing address on file. If fax delivery has been enabled for your account, the notice will also be sent by fax.
  • Your choices:
    • Accept the chargeback: If you choose this, or fail to respond within the ten day time period, the chargeback amount will be permanently debited from your account.
    • Pursue Arbitration: This means you believe you have strong evidence and want to fight the dispute further. Be aware that arbitration can involve significant fees, regardless of the outcome.
      • Important: In these cases, proceeding requires a signed authorization form.
      • If additional authorization is required and not received, the case may be automatically accepted.
  • Impact on your funds: If you accept the chargeback or don't respond, the chargeback amount will be debited from your account as a final transaction.

Merchants are not notified if they win a Pre-Arbitration case, and cases that proceed to Arbitration may not generate an additional merchant notification.

 

4) PIN Debit Chargeback

  • What it is: A PIN debit chargeback occurs when a customer disputes a PIN-based debit card transaction with their bank. Unlike traditional credit card chargebacks, PIN debit disputes are governed by Regulation E and are processed through electronic funds transfer (EFT) networks rather than the Visa or Mastercard chargeback systems.
  • How you'll be notified: The chargeback will appear as an Adjustment in Bank Deposits, and TSYS will mail a "Debit Card Chargeback Adjustment Advice" notice containing response instructions.
  • Impact on your funds: When a PIN debit chargeback occurs, the disputed funds are withdrawn from your account as part of the cardholder's bank investigation.
  • How it appears in PayJunction: PIN debit chargebacks do not appear in the Chargebacks Report. Instead, they appear as an Adjustment on the Bank Deposits page.
  • Your action is required: If you receive a Debit Card Chargeback Adjustment Advice, review the reason for the dispute and respond using the instructions provided in the notice. These disputes are handled directly by the cardholder's bank and have different response requirements and timelines than standard card-brand chargebacks.
  • Need more information? For detailed instructions on identifying, responding to, and managing PIN debit chargebacks, see our article: PIN Debit Chargebacks.

 

If you've received any type of chargeback notification and have questions, don't hesitate to call the PayJunction Risk Department at 800-601-0230 x5. We can help guide you through the process.

 

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