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Chargebacks 101: Prevention and Risk Reduction


2020 brought challenges for most businesses, not the least of which was cancellations of service and disputes at a higher level than ever before. Ascent clients are set up as Merchant of Record (MOR) and therefore receive notification of and documentation about any chargebacks they receive directly from their acquiring bank. Ascent sets you up as Merchant of Record (MOR) so your funds are FDIC-insured every step of the way from the guest’s card to your bank account. Being MOR gives you the most freedom to set your own policies and practices. We are strongly urging merchants to have flexible cancellation and refund policies at this unprecedented time – but choose a processor that makes sure you get to make that choice for yourself.

Chargebacks are an unfortunate reality for any business that accepts credit card payments. It is up to you, the merchant, to respond to disputes and there are definitely best practices to protect your bottom line.

Let’s go over the basics of disputes AKA chargebacks so you are better prepared for how to respond when you get one.

How does a chargeback work behind the scenes?

  • The cardholder disputes the charge on their card by contacting their issuing bank
  • The issuer then debits the acquiring/settling bank
  • The acquiring bank has enough information internally to re-present almost 20% of the incoming chargebacks back to the issuer without contacting or debiting the merchant
  • On the remaining 80%, the merchant is debited the amount of the chargeback and sent the documentation
  • The merchant has a chance to rebut the chargeback claims
  • If the merchant sends in a rebuttal with supporting documentation and it meets the requirements, the funds are put back into merchant’s account while further investigation occurs (by the issuer and sometimes the card association). IMPORTANT: THIS IS A TEMPORARY CREDIT UNTIL AT LEAST 60 DAYS HAVE PASSED AND NO FURTHER COMMUNICATION/ACTION HAS OCCURRED ON THE CASE
  • If the investigation shows that the regulations support the merchant, the claim is complete and the merchant “won” (the merchant already has the money back)
  • If the investigation shows that the regulations support the cardholder, the funds are withdrawn again from the merchant’s account and given back to the cardholder
  • If the merchant “wins” the chargeback initially, there is still the possibility of the issuer charging it back for a different reason code, or appealing to the card association, in which case the merchant might receive a pre-arbitration or pre-compliance chargeback
  • Pre-arbitration, pre-compliance and “second” chargebacks have fees assessed to the loser of the dispute and the dispute goes to the card association for consideration. Please contact Ascent before responding to this type of chargeback and we can help you weigh the risks

So, what do you do once you get a chargeback?
General expectations are that merchants act in good faith and make every effort to be flexible when resolving disputed transactions. Card Brands expect that cardholders work directly with the merchant to resolve their issue, ahead of initiating a dispute with their issuer and encourage merchants to resolve the issue outside of the chargeback process whenever possible.
Decide if you need to respond

  • Sometimes the cardholder dispute is valid – maybe you accidentally double charged the guest or didn’t process a refund due quickly enough. If you accept the chargeback you can either respond that you accept or do nothing. The funds have been debited from your bank account and returned to the cardholder already.
  • If you disagree with the chargeback, you need to respond before the Respond By Date for each case. If you miss the deadline, you forfeit your ability to rebut the cardholder’s claims through the chargeback process.

Rebuttal tips

  • When rebutting a chargeback, include the first page of the chargeback documentation and check the box next to “please check here if you disagree with the cardholder’s claim.” 
  • Always write/type the case number in the upper right corner of every page of documentation you send back with your response.    
  • Each chargeback has a reason code associated with it (Services Not Rendered, Not As Described, Fraud, etc.) and you want your rebuttal to be tailored to address the requirements of that particular reason.  The chargeback documentation you receive includes some information about what you can provide to fight the chargeback, but we are always here to help you as well.    
  • Keep your rebuttal response brief and targeted to the chargeback reason code.
  • Provide supporting documents, such as folio, signed lease agreement, work orders, or proof the cardholder had to “click to agree” to your polices at the time of payment.

If you have questions, contact Ascent at mailto:


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