Mastering Visa Chargeback Reason Codes for Dispute Success

When handling Visa chargebacks, your first cue should be to look at the reason code. Thankfully, the card network has simplified its chargeback reason code list, providing ample explanation to help you know why the chargeback occurred. Armed with this information, you can effortlessly gather proof or evidence to show that you did everything right when handling the disputed transactions.

Cardholder disputes have diverse causes, but some reason codes, like reason code 10.4, are more frequent. This reason code deals with fraud-related, card-not-present transactions and is significant for online merchants. Excessive fraud chargebacks can lead to penalties under Visa's Fraud Monitoring Programs.

Understanding Visa chargeback reason codes is the key to ensuring a good business reputation and revenue. This guide will help you navigate these codes effectively.

What are Visa Chargeback Reason Codes?

These codes help you understand why a chargeback was initiated and the best way to respond. Visa chargeback reason codes are strictly numeric and highlight the cause of a chargeback.

Visa chargeback reason codes explain the cause of a chargeback. For example, reason code 10.4 (Fraud-Card Not Present) applies when an unauthorized transaction is made online without the cardholder present. Another example is code 13.1 which implies the customer did not receive the goods paid for on the due date. In this case, you can refute the chargeback by providing proof of delivery.

Besides telling you why a chargeback occurred, the Visa chargeback reason codes will show you the evidence needed to dispute it. You’ll know which documents to submit. For example, for code 13.1, providing a delivery receipt or tracking details can help dispute a claim of non-delivery.

It’s important to note that while you can prevent chargebacks to some extent, not all are avoidable. Some cardholders may dispute a transaction even when you’ve done nothing wrong. As such, you must be prepared to use these dispute reason codes when dealing with the dispute process.

Want to learn more about Visa’s guidelines on chargeback management? Check out Visa’s Chargeback Management Guide for Merchants.

Key Visa Chargeback Reason Codes and Their Implications

Remember that chargebacks may occur for various reasons. Proper documentation is essential for all your transactions to protect your business. 

A common chargeback reason code is 13.3, where the cardholder disputes that the goods or service received was not as described or is defective. This code is often used when there's a discrepancy between the product or service description and what the customer actually received. For instance, a missing feature, incorrect specification, or color difference can trigger this dispute.

Another one you should look out for is reason code 13.1, which typically involves merchandise or physical product deliveries. This code indicates that the customer didn’t receive the goods by the promised date. In most cases, this chargeback can be disputed by providing proof of delivery, such as tracking information or a signed receipt.

Reason code 10.4 deals with unauthorized transactions, associated with fraud. If you receive excessive chargebacks under this code, Visa may impose penalties. Hence, you must provide all necessary documentation to show that you took the required steps and obtained authorization for the transaction.

Both intentional and friendly fraud are common causes of the reason code 10.4. In true fraud cases, cybercriminals may steal or clone credit card details and use them for online transactions. With friendly fraud, a cardholder may unknowingly dispute a previously authorized charge.

How to Respond to Visa Chargeback Reason Codes

If you know why the chargeback occurred and have evidence to refute it, you can submit a dispute through your acquiring bank. The response process is tailored to each code. For example, code 10.4 requires AVS and CVV verification records, while code 13.1 might need delivery confirmation.

With that said, here is a typical step-by-step guide on how to respond to chargebacks on your merchant account:

1. Identify the disputed transaction.
2. Review the reason for the chargeback.
3. Identify and gather the needed documentation as proof (examples include receipts, transaction authorization request approval, cancellation or return policy, etc.)
4. Respond to the chargeback by submitting the documentation.

For reason code 10.4 and other fraud-related codes, we recommend responding quickly. That allows time to address any inquiries or refutals that may arise after your response.

For fraud-related chargebacks, particularly card-not-present transactions, the proof of authorization you’ll need includes the following:

• CVV2 validation
• AVS validation

The Visa Fraud Monitoring Program and Its Connection to Chargeback Reason Codes

The Visa Fraud Monitoring Program VFMP tracks merchants that receive excessive chargebacks with fraud-related codes like 10.4. Your chargeback ratio must exceed a certain threshold for the program to flag it. The chargeback ratio refers to the number of chargebacks you receive compared to the total number of transactions you’ve made within a given period. Before Visa adds you to the VFMP, it will notify you when you reach the early warning threshold. At this stage, you can reduce your chargeback rate to full enrollment in the VFMP. If chargebacks remain high, Visa may proceed with enrollment.

Financial penalties can arise if merchants remain in the VFMP or the Visa Dispute Monitoring Program (VDMP) for extended periods. Reaching certain thresholds can lead to fines or higher transaction fees, underscoring the importance of maintaining a low chargeback ratio.

VFMP focuses exclusively on fraud-related chargebacks, tracking merchants with high fraud ratios to help ensure they take preventative measures.

Here are some tips on how to avoid the Visa Fraud Monitoring Program:

1. Employ advanced fraud protection tools and software- Invest in advanced fraud detection tools using machine learning to recognize suspicious patterns before they escalate.
2. Verify customer details and use address verification systems (AVS)- AVS helps confirm the billing address and match the address on file with the card issuer.
3. Use CVV/CVC verification for card-not-present transactions- CVV/CVC code is essential for online transactions adding an extra layer of security.
4. Track transaction patterns for anomalies- Monitor irregular transaction behavior, such as unusually large or frequent orders in high-risk regions.
5. Communicate with customers proactively and provide accessible customer support- Provide open communication and make it easy for customers to reach out to support, this will reduce the likelihood of disputes escalating to chargebacks.

If you’ve been added to the VFMP, you can still employ the above steps to reduce your chargebacks and exit the program.

To learn more about how the VFMP affects merchants, refer to Visa Chargeback Guide: Reason Codes & Fraud Monitoring.

Best Practices for Preventing Chargebacks Related to Visa Reason Codes

Effectively managing chargebacks, especially for Visa transactions requires both a proactive approach and prevention and efficient response strategies. Chargeflow’s automation and alerts offer a comprehensive approach to handling disputes based on Visa’s reason codes, prevent potential issues, and safeguard your chargeback ratio. Here’s how:

• Real-Time Alerts to Prevent Chargebacks- Get notified by Chargeflow Alerts of potential disputes in real-time, allowing you to respond within Visa’s 24-hour window to prevent chargebacks. Early warning system proactive measures such as issuing refunds or addressing customer issues, can potentially reduce chargebacks by up to 90%.

• Automated Dispute Management for Accurate Responses-  Visa requires different types of documentation based on the various reason codes. Chargeflow’s automated tools help you gather and submit the correct evidence tailored to each dispute by type. Automating your responses and compiling relevant information such as CVV validations, AVS results, or proof of delivery, Chargeflow will ensure you comply with Visa’s guidelines and increase your chance of dispute success.
• Comprehensive Data Insights- Chargeflow’s Insights Dashboard provides a detailed breakdown of disputes by processor view, card network, and reason code, helping you identify recurring issues tied to the specific Visa codes. These data-driven insights allow you to adjust your policies and proactively address the root causes of disputes.

‍Dispute Rate and Fee Management- Chargeflow has customizable settings to help you maintain a target dispute rate, avoiding costly penalties and monitoring programs like VFMP and VDMP. Automated alerts and controls help you ensure your chargeback ratio remains within acceptable thresholds, protecting your business from potential fines or escalated fees. 

• Enhanced Customer Support and Communication- While automation should be key, Chargeflow also supports proactive customer communication. Providing accessible support channels allows customers to resolve issues directly with you, reducing the likelihood of escalated disputes.

Combining Chargeflow alerts, automation, and real-time insights ensures you approach chargebacks with a preventative strategy rooted in Visa’s reason code requirements. Chargeflow’s tools empower you to minimize chargebacks, reduce fees, and streamline dispute management, allowing you to focus on maintaining profitability and customer trust.

For more detailed guidance, check out How to Dispute a Chargeback: A Complete Guide for Merchants.

Conclusion

Understanding Visa chargeback reason codes provides essential guidance for effectively managing disputes. By avoiding a one-size-fits-all approach and tailoring responses to each code with the appropriate evidence. Mastering Visa codes like 13.1 and 10.4 will help you reduce chargebacks and avoid penalties from Visa’s VFMP. 

Implementing these best practices – such as proactive customer service and clear policies is essential for any merchant. However, for businesses with high transaction volumes, leveraging an automated solution like Chargeflow can be transformative. Chargeflow’s tools not only streamline the dispute process but also help you stay compliant with Visa’s requirements and ensure you’re able to manage chargebacks efficiently while protecting your revenue with minimal manual effort. With Chargeflow, merchants can focus on what really matters – growing their business, confident that they have a system that maximizes dispute success and safeguards their bottom line. 

Want to learn more? Get started with Chargeflow today.