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How to Dispute a Chargeback

Steps to take if a credit card payment comes back declined

Serena Edwards avatar
Written by Serena Edwards
Updated over a month ago

A chargeback or payment dispute happens when a cardholder questions a credit or debit card transaction and asks their bank to reverse it. Chargebacks are meant to be a safeguard against fraud for consumers. When your company faces a chargeback, it is essential to dispute it promptly and effectively to avoid losing revenue.

Chargeback Notices

When the acquiring bank or payment processor informs the merchant about the chargeback dispute, along with their version of the notification, they also provide forms for the merchant to complete and return, detailing their perspective on the dispute. Merchants are typically given a short deadline to respond to this request, usually around 7 to 10 days.

CardConnect (Legacy Clients Only)

If your merchant account is serviced through CardConnect, you can check for chargebacks in your merchant portal; see the instructions below.

CardConnect Instructions

Log into your merchant processor’s portal (e.g., CardPointe) to find your list of chargebacks. CardPointe login > page https://cardpointe.com/account/.

credit card chargeback  in Enrollsy

EnrollsyPay

If your merchant account is serviced through EnrollsyPay, chargeback notices are forwarded to us by Till Payments and we forward them to you.

Sample Chargeback Notice

Below is an example of a standard chargeback notice that a merchant may receive. Each bank or processor may have a different format, but the details included will be the same.

See the "Dispute Response" page in the attachment for supporting documentation. Here is an example of a Dispute Response page:

Guide to Dispute a Chargeback

To dispute a chargeback, follow the instructions on the back of the Dispute Notification. You must respond by the Chargeback due date (found on the top right of the notification) and provide the documentation.

Chargebacks can be reversed if the explanation and documentation are sufficient, but reversals are conditional. The customer's bank may dispute the case through an exception item, such as a pre-arbitration.

It is not recommended that you issue a credit after you have received notification of a dispute because the customer's bank may have applied a conditional credit to the account. If you issue a credit under these circumstances, you may not be able to recover the credit; in fact, you may be responsible for the credit and chargeback.

Here’s a step-by-step guide for how a school can dispute a chargeback:

1. Understand the Chargeback Reason Code

  • Reason Code: When a chargeback is initiated, the school will receive a reason code from the payment processor or card network (e.g., Visa, Mastercard, etc.). This code indicates the customer’s reason for disputing the charge, such as "services not received" or "unauthorized transaction." See this resource to look up the reason code based on the card network.

  • Review the Claim: Carefully review the reason for the chargeback to ensure you understand the parent or guardian’s complaint. This will guide your response.

2. Gather Supporting Evidence

Collect all relevant documentation to prove that the charge was valid and the school provided the agreed-upon services or products. Common types of evidence include:

  • Explanation: A full explanation of why the chargeback is invalid and why the original transaction is valid. This explanation can include an itemization, a description of the service, and/or proof the cardholder was billed for separate transactions.

  • Signed Enrollment Agreements: Show that the parent or guardian agreed to the fees, payment terms, and refund policies.

  • Payment Receipts: Provide proof of the payment, including the transaction date, amount, and payment method.

  • Attendance Records: If the chargeback is related to services not received, provide records showing that the student attended classes or accessed services.

  • Communication Records: If there were emails, phone calls, or messages discussing the charges, refunds, or any issues the parent raised, include these to show attempts to resolve the problem.

  • Refund Policy: Include a copy of the school's refund policy, and highlight the relevant sections that apply to the dispute.

  • Delivery Confirmation: If the charge was for materials (e.g., textbooks, uniforms), include proof of delivery or purchase.

3. Respond to the Chargeback Promptly

  • Timeframe: You typically have 7 to 14 days to respond to a chargeback, depending on the card network or payment processor. Act quickly to gather your evidence and submit your dispute.

  • Dispute the Chargeback: Submit your evidence through the payment processor’s or bank’s online dispute resolution system, along with a written explanation that addresses the reason for the chargeback.

4. Write a Clear and Concise Rebuttal

Your written explanation should be clear and professional and directly address the reason for the chargeback. Here’s how to structure your response:

  • Acknowledge the Chargeback Reason: Reference the chargeback reason code and briefly describe why the charge is valid.

  • Provide Evidence: Point to the attached documentation that supports your claim (e.g., proof of service, signed agreements, payment records).

  • Explain the School’s Policy: Reference any relevant sections of your refund or enrollment policies, especially if they were agreed upon by the parent or guardian.

5. Submit the Dispute through the Correct Channel

  • Payment Processor Portal: Most payment processors offer online tools to submit chargeback disputes. Make sure to follow their submission process and provide all requested information.

  • Include All Documentation: Upload all necessary documents (e.g., receipts, agreements, emails) in the format requested by the processor.

6. Follow Up with Your Payment Processor

  • Monitor the Dispute: Keep an eye on the status of your dispute through your payment processor’s portal or email. Follow up if necessary to ensure the dispute is progressing.

7. Prepare for Arbitration (If Necessary)

  • Request Arbitration: If the chargeback is not resolved in your favor and you believe you have a strong case, you may request arbitration through the card network. Arbitration is the final stage, where the card network (e.g., Visa, Mastercard) reviews the case and makes a binding decision.

  • Be Aware of Costs: Keep in mind that arbitration can involve additional fees, so it should be reserved for cases where the disputed amount is significant, and you have strong evidence to support your case.

8. Review Your School’s Procedures

  • Prevent Future Chargebacks: After handling the dispute, review your processes to identify areas where communication or policies could be improved to prevent future chargebacks. This may include better documentation, clearer refund policies, or improved customer communication.

9. Maintain Good Records for Future Disputes

  • Organize Documentation: Keep detailed records of all transactions, agreements, communications, and deliveries to be ready for any future disputes. The better organized and thorough your records, the easier it will be to handle chargebacks efficiently.

By following these steps, you can effectively dispute chargebacks, protect its revenue, and minimize the impact of unjustified chargebacks.

Arbitration Process

Here is a chart showing the typical flow of the arbitration process:

The final step that a merchant may encounter in the chargeback process is known as arbitration, or pre-arbitation (in the case of Visa). This stage comes into play when the chargeback dispute has escalated beyond the initial reviews and responses from both the acquiring and issuing banks. In arbitration, the relevant card association, such as Visa or Mastercard, intervenes to help resolve the disagreement.

During the arbitration process, both the acquiring bank (which represents the merchant) and the issuing bank (which represents the cardholder) present their cases along with any supporting documentation. The card association reviews the evidence submitted by both parties, examining the details of the transaction, the reasons for the chargeback, and any relevant communications.

The arbitration process is typically governed by specific rules set forth by the card association, which outlines how the dispute will be handled, the timelines for submission, and the criteria for evaluating the evidence. This process can be formal and may involve additional fees for the banks, which can sometimes be passed on to the merchant.

Once the card association has reviewed the evidence, they render a decision on the dispute. This decision is binding, meaning that both the acquiring and issuing banks must comply with the outcome. If the card association rules in favor of the issuing bank, the merchant may face a permanent chargeback and potential loss of the disputed funds. Conversely, if the decision favors the merchant, the funds will be returned to their account.

Acquiring banks and merchants typically prefer to avoid arbitration due to the significant fees, time, and effort it requires. Arbitration fees generally range from $500 to $900, and sometimes more depending on the card association, while the process can extend the chargeback timeline by an additional 10 to 45 days. For smaller transactions, merchants may decide arbitration isn’t worth pursuing, but for high-value transactions, often worth thousands of dollars, they may find it worthwhile to proceed.

Arbitration can be a crucial last resort for merchants who believe they have a strong case against a chargeback. However, merchants need to recognize that this stage can be time-consuming and may not always yield the desired outcome. Therefore, thorough documentation and a proactive approach to managing disputes earlier in the process can help mitigate the need for arbitration.

Post Chargeback

For merchants that have lost a chargeback dispute at any stage, or opted not to dispute it, forfeit the tuition or fees collected, any services already provided, and any related processing fees. Once a chargeback is lost, the case is closed, and no further appeals can be pursued.

When either you don't want to dispute the chargeback or lose the dispute, you can apply a cash refund to the customer account so Enrollsy reflects what the processor has reported. You will have to do this manually because you won’t get a notification from the processor that a chargeback happens. Only the customer gets notified via email or physical mail. See this support article to learn how to do a cash refund.

NOTE: We will work on automating the process of recording chargebacks in the future.

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