Mastering Chargeback Reason Codes: A Merchant's Blueprint

Chargeback reason codes are the hidden language of payment disputes — and most merchants don’t speak it. Each card network (Visa, Mastercard, Amex, Discover) uses its own system of codes and rules, leaving businesses confused, reactive, and losing winnable disputes. Every misinterpreted code costs you more than just the transaction — it means lost revenue, added fees, and higher processing rates.

This guide simplifies the chaos. You’ll get a clear, unified breakdown of all major card network reason codes, explained in plain English with actionable defense strategies for each. Learn to interpret codes accurately, respond effectively, and prevent future chargebacks with data-driven, automated systems.

What Are Chargeback Reason Codes? (The Foundation)

The Purpose of Reason Codes

Card networks created standardized reason codes to provide a consistent and transparent way to classify and resolve payment disputes. These codes serve several critical purposes:

• Classification: They categorize the reason for the chargeback, allowing issuing banks (the cardholder's bank) to communicate the specific problem to the acquiring bank (the merchant's bank).

• Communication: They provide a standardized language for all parties involved in the dispute process.

• Evidence Requirements: They dictate the type of evidence required to successfully defend against the chargeback.

• Dispute Resolution: They ultimately determine the outcome of the dispute, deciding whether the merchant or the cardholder bears the financial responsibility.

  
  

Reason codes are the foundation of the chargeback process. Understanding their purpose is the first step towards mastering chargeback defense.

The Anatomy of a Reason Code

Chargeback reason codes are structured differently depending on the card network. Here's a breakdown:

• Visa: Uses a numerical system, typically with two or three digits separated by a decimal point (e.g., 10.4, 13.1). The first digit usually indicates the general category of the chargeback. Visa is transitioning to new reason codes as of 2024/2025, so you may see 10.x, 11.x, 12.x, and 13.x codes.

• Mastercard: Employs alphanumeric codes, often starting with "4" followed by three digits (e.g., 4837, 4853). These codes are grouped into different series that represent various dispute types.

• American Express: Utilizes codes starting with a letter (e.g., C31).

• Discover: Similar structure to Visa.

  
  

Example:

• Visa Code 10.4: The "10" indicates a fraud-related chargeback. The ".4" specifies "Other Fraud - Card Absent."

• Mastercard Code 4837: "No Cardholder Authorization."

  
  

The Players Involved:

• Cardholder: The individual who made the purchase and is disputing the charge.

• Issuing Bank: The cardholder's bank, which initiates the chargeback on their behalf.

• Card Network: Visa, Mastercard, American Express, or Discover, which sets the rules and procedures for chargebacks.

• Acquiring Bank: The merchant's bank, which receives the chargeback notification and forwards it to the merchant.

• Merchant: The business that processed the transaction and is now facing the chargeback.

  
  

Why Reason Codes Matter for Your Bottom Line

• Direct Revenue Impact: Successfully defending against a chargeback means retaining the revenue from the original sale. Misunderstanding a code can lead to a lost dispute and a financial loss.

• Win Rates: Your ability to interpret reason codes and provide the appropriate evidence directly influences your chargeback win rates. Higher win rates translate into more revenue retained.

• Hidden Costs: Ignoring reason codes can lead to increased chargeback fees, higher processing rates (if your chargeback ratio exceeds certain thresholds), and wasted time and resources.

  
  

By mastering reason codes, you can significantly reduce your chargeback losses and improve your overall profitability.

The Major Card Networks: An Overview

The payment landscape is dominated by a few key players:

• Visa: The market leader, processing the largest volume of transactions globally. Visa uses a numerical coding system (10.x, 11.x, 12.x, 13.x family structure).

• Mastercard: The second-largest card network, employing alphanumeric codes (4xxx series). Mastercard uses different category names than Visa.

• American Express: A direct issuer, meaning they issue cards and process transactions. Amex uses unique codes (C## series) and has a different dispute process.

• Discover: A smaller major network with a structure similar to Visa.

  
  

While American Express and Discover are important, this guide focuses primarily on Visa and Mastercard, as they account for the vast majority (80%+) of card transactions in the US. Understanding their reason codes is crucial for most merchants.

The Four Universal Categories of Chargeback Reason Codes

While each card network uses different codes, ALL chargebacks ultimately fall into four universal categories:

1. Fraud Chargebacks: Unauthorized transactions resulting from stolen cards or fraudulent activity.

2. Authorization Issues: Problems related to transaction approval, such as declined authorizations or missing authorization codes.

3. Processing Errors: Mistakes made by the merchant during the transaction process, such as duplicate charges or incorrect amounts.

4. Consumer Disputes: Disputes arising from customer dissatisfaction, such as merchandise not received or services not as described.

   
   

Understanding these categories provides a framework for analyzing and addressing chargebacks, regardless of the specific reason code.

FRAUD CHARGEBACKS - Category 1

Understanding Fraud vs. Friendly Fraud

It's crucial to distinguish between true fraud and friendly fraud:

• True Fraud: Involves stolen cards, account takeovers, or other criminal activities where a fraudster uses someone else's payment information without their consent.

• Friendly Fraud: Occurs when a legitimate customer makes a purchase and then falsely claims the transaction was unauthorized. This can be intentional (the customer is trying to get something for free) or unintentional (the customer doesn't recognize the charge or forgets about the purchase).

  
  

Why does this distinction matter? Because the defense strategies differ. True fraud requires proving the transaction was legitimate, while friendly fraud requires proving the customer authorized the purchase.

Visa Fraud Reason Codes (10.x Family)

• Code 10.1 - EMV Liability Shift Counterfeit

  • What it means: A counterfeit card was used at an EMV-enabled terminal.

  • When it occurs: The merchant didn't use the chip reader, even though it was available.

  • Who's liable: Usually the merchant if they didn't use the EMV chip reader.

  • Defense strategy: Prove the chip was used, or that the transaction was legitimate even without chip usage (e.g., a pre-existing customer relationship).

• Code 10.2 - EMV Liability Shift Non-Counterfeit

  • What it means: An unauthorized transaction occurred at an EMV-enabled terminal, but the card was not counterfeit.

  • Defense strategy: Provide evidence that the cardholder authorized the transaction, such as a signed receipt, security footage, or proof of delivery to the cardholder's address.

• Code 10.3 - Other Fraud - Card Present

  • What it means: Fraudulent transaction where the card was physically present.

  • Defense Strategy: Security footage, signed receipt, employee testimony.

• Code 10.4 - Other Fraud - Card Absent (MOST COMMON)

  • What it means: Fraudulent transaction where the card was not physically present (e.g., online purchase, phone order).

  • Defense strategy: AVS match, CVV match, 3D Secure authentication, IP address geolocation, device fingerprinting, prior transaction history with the cardholder, delivery confirmation.

• Code 10.5 - Visa Fraud Monitoring Program

  • What it means: The transaction was flagged by Visa's fraud monitoring program.

  • Defense Strategy: Provide compelling evidence of authorization and legitimacy.

    
    

Mastercard Fraud Reason Codes

• Code 4837 - No Cardholder Authorization (MOST COMMON)

  • What it means: The cardholder claims they didn't authorize the transaction.

  • When it occurs: Often friendly fraud disguised as true fraud.

  • Defense strategy: Proof of authorization (CVV match, AVS match, 3D Secure authentication, IP address, past transaction history, delivery confirmation). This is your bread and butter for fighting friendly fraud.

• Code 4849 - Questionable Merchant Activity

  • What it means: Covers a broad range of fraudulent or suspicious merchant practices.

  • Defense strategies: Demonstrate legitimate business practices, provide transaction details, and address any specific concerns raised by the issuing bank.

• Code 4870 - Chip Liability Shift (Counterfeit)

  • What it means: A counterfeit card was used at a terminal that should have supported chip transactions.

  • Defense: Prove the terminal was EMV-enabled and functioning correctly.

• Code 4871 - Chip/PIN Liability Shift

  • What it means: A transaction where the chip card was not read, or the PIN was not entered correctly.

  • Defense: Prove that the chip was read or that the PIN was correctly entered.

    
    

Cross-Network Fraud Defense Strategies

Here are unified tactics that work across Visa AND Mastercard fraud codes:

• Essential Evidence: AVS match, CVV match, 3D Secure (Strong Customer Authentication), IP geolocation.

• Proving Past Customer Relationship: Show prior successful transactions with the same cardholder.

• For Card-Not-Present Fraud: Use device fingerprinting, email/phone verification, and delivery signatures.

• For Friendly Fraud Specifically: Provide proof of product usage or service consumption (e.g., download logs, account activity).

  
  

AUTHORIZATION CHARGEBACKS - Category 2

Visa Authorization Codes (11.x Family)

• Code 11.1 - Card Recovery Bulletin

  • What it means: The card was listed on a card recovery bulletin (e.g., reported lost or stolen).

  • Defense: Prove you verified the card against the bulletin before processing the transaction.

• Code 11.2 - Declined Authorization

  • What it means: The transaction was processed despite receiving a declined authorization.

  • Defense: Prove you received a valid authorization code before completing the transaction.

• Code 11.3 - No Authorization

  • What it means: No authorization was obtained for the transaction.

  • Defense: Provide the authorization code and timestamp, or prove the transaction fell under an exception to the authorization requirement.

    
    

Mastercard Authorization Codes

• Code 4808 - Authorization Not Obtained / Already Paid

  • What it means: Either no authorization was obtained, or the transaction was already paid through another method.

  • Defense: Provide the authorization code and timestamp, or prove the transaction was not a duplicate.

• Code 4834 - Point-of-Interaction Error

  • What it means: A general error occurred at the point of sale, often related to authorization issues.

  • Defense: Provide detailed transaction logs and evidence of proper authorization.

    
    

How to Defend Authorization Disputes

• Proving Valid Authorization: Provide the authorization code and timestamp from your payment gateway or POS system.

• Addressing Duplicate Payment Claims (4808): Show transaction logs proving only one charge was processed.

• Evidence Requirements: Authorization logs, gateway responses, timestamps.

PROCESSING ERROR CHARGEBACKS - Category 3

Visa Processing Error Codes (12.x Family)

• Code 12.1 - Late Presentment

  • What it means: The transaction was submitted to the card network too late.

  • Defense: Prove the timeline was met or that an exception applies (e.g., a delayed billing agreement).

• Code 12.2 - Incorrect Transaction Code

  • What it means: The wrong transaction code was used (e.g., a sale was processed as a refund).

  • Defense: Provide documentation showing the correct transaction code was used.

• Code 12.3 - Incorrect Currency

  • What it means: The transaction was processed in the wrong currency.

  • Defense: Show that the correct currency was used or that the cardholder agreed to the currency conversion.

• Code 12.4 - Incorrect Account Number

  • What it means: The wrong account number was used.

  • Defense: This is difficult to defend. Usually, you'll need to accept the chargeback.

• Code 12.5 - Incorrect Amount

  • What it means: The transaction amount was incorrect.

  • Defense: Provide documentation showing the correct amount was charged and that the cardholder agreed to it.

• Code 12.6 - Duplicate Processing (COMMON)

  • What it means: The cardholder was charged twice for the same transaction.

  • Defense: Show transaction logs proving only one charge was processed.

• Code 12.7 - Invalid Data

  • What it means: The transaction contained invalid data.

  • Defense: Provide corrected transaction data or prove the original data was valid.

    
    

Mastercard Processing Error Codes

• Code 4834 - Point-of-Interaction Error

  • What it means: A general error occurred at the point of sale, often related to processing issues.

  • Defense: Provide detailed transaction logs and evidence of proper processing.

• Code 4840 - Fraudulent Processing of Transactions

  • What it means: The merchant engaged in fraudulent processing practices.

  • Defense: Demonstrate legitimate business practices and provide detailed transaction information.

• Code 4870/4871 - Chip Liability Shift (also under fraud)

  • What it means: Issues related to chip card processing.

  • Defense: Prove proper chip card processing procedures were followed.

    
    

Preventing and Fighting Processing Errors

These are MERCHANT errors—usually easiest to prevent.

• How to Avoid: Implement better QA procedures, use duplicate transaction detection software, and ensure proper gateway configuration.

• Defense Strategy: Prove the error didn't occur (show only one charge, correct amount, etc.).

  
  

CONSUMER DISPUTE CHARGEBACKS - Category 4

Visa Consumer Dispute Codes (13.x Family)

• Code 13.1 - Merchandise/Services Not Received (VERY COMMON)

  • What it means: The customer claims they never received the product or service.

  • Defense: Provide proof of delivery (tracking information, signature confirmation, service usage logs).

• Code 13.2 - Cancelled Recurring Transaction

  • What it means: The customer was charged for a recurring transaction after they cancelled their subscription.

  • Defense: Prove the cancellation policy was followed, or that no cancellation request was received.

• Code 13.3 - Not as Described or Defective Merchandise

  • What it means: The product received was significantly different than advertised or was defective.

  • Defense: Provide product descriptions, photos, terms of service accepted by the customer, and communication logs.

• Code 13.4 - Counterfeit Merchandise

  • What it means: The customer received counterfeit merchandise.

  • Defense: Provide documentation proving the authenticity of the merchandise.

• Code 13.5 - Misrepresentation

  • What it means: The merchant misrepresented the product or service.

  • Defense: Provide accurate product descriptions and terms of service.

• Code 13.6 - Credit Not Processed

  • What it means: The customer was promised a refund but never received it.

  • Defense: Provide proof that the refund was processed (refund transaction ID, bank confirmation).

• Code 13.7 - Cancelled Merchandise/Services

  • What it means: The customer cancelled the merchandise or services before receiving them.

  • Defense: Provide documentation of the cancellation policy and whether the cancellation was made within the allowed timeframe.

• Code 13.8 - Original Credit Transaction Not Accepted

  • What it means: The original credit transaction was not accepted.

  • Defense: Provide documentation showing the credit transaction was valid.

• Code 13.9 - Non-Receipt of Cash or Load Value (ATM disputes)

  • What it means: The customer claims they did not receive cash from an ATM.

  • Defense: Provide ATM logs and security footage.

    
    

Mastercard Consumer Dispute Codes

• Code 4853 - Goods/Services Not Received (VERY COMMON)

  • What it means: Same as Visa 13.1.

  • Defense: Delivery confirmation, service usage logs.

• Code 4855 - Non-Receipt of Goods or Services

  • What it means: Similar to 4853 but can also apply to situations where the customer claims the goods or services were never provided.

  • Defense: Delivery confirmation, service contracts, and communication logs.

• Code 4863 - Credit Not Processed (COMMON)

  • What it means: The customer claims they were promised a refund but never received it.

  • Defense: Refund transaction ID, bank confirmation.

• Code 4899 - General Cardholder Dispute

  • What it means: A catch-all code for various cardholder disputes not covered by other codes.

  • Defense: Provide detailed transaction information and address the specific concerns raised by the cardholder.

Winning Consumer Dispute Chargebacks

• Customer Service is Your Best Defense: Resolve issues BEFORE they escalate into chargebacks.

• Essential Evidence by Dispute Type:

  • Not Received: Tracking information, signature confirmation, usage logs.

  • Not as Described: Product descriptions, photos, customer communications.

  • Credit Not Processed: Refund transaction ID, bank confirmation.

• When to Fight vs. When to Issue a Refund: Weigh the cost of fighting the chargeback against the potential loss and the likelihood of winning.

  
  

SPECIAL CATEGORIES & EDGE CASES

Subscription & Recurring Transaction Disputes

• Visa 13.2 vs. Mastercard codes: Understand the specific requirements for each network.

• Proof of Proper Subscription Management: Provide documentation of the subscription agreement, billing schedule, and cancellation policy.

• Cancellation Policy Requirements: Ensure your cancellation policy is clear and easily accessible to customers.

Digital Goods Disputes

• Mastercard 4464 - Digital Goods: Specific code for disputes related to digital products.

• Unique Challenges: Hard to prove "delivery" of digital goods.

• Defense Tactics: Download logs, IP address, usage data, account activity.

  
  

Travel & Hospitality Specific Codes

• "No-show" disputes (Mastercard 4853): Customers claiming they didn't use the service.

• Cancellation Policy Disputes: Disputes over cancellation fees.

• Evidence Requirements for Travel Merchants: Reservation confirmations, cancellation policies, and proof of service availability.

  
  

ATM & Cash Disputes

• Visa 13.9

• Mastercard 4846

• Proving Cash Was Dispensed Correctly: ATM logs, security footage, and maintenance records.

  
  

Advanced Strategy: The 5 Critical Insights for Chargeback Mastery

Insight 1: Reason Codes Don't Always Tell the Full Story

• Why the Stated Reason Code Might Not Be the Real Issue: Issuing banks sometimes choose the most convenient code, not necessarily the most accurate one.

• How to Investigate Beyond the Surface Code: Look for patterns in your chargebacks and analyze customer behavior.

• Example: A "Transaction not recognized" (fraud code) might actually be a case of friendly fraud where the customer simply forgot about the purchase.

  
  

Insight 2: Every Reason Code Can Be Fought

• Misconception: Some codes are "unwinnable."

• Reality: Every code qualifies for representment IF you have the necessary evidence.

• The Question Isn't "Can I Fight?" but "Do I Have Evidence?"

  
  

Insight 3: Customize Your Response for Each Reason Code

• Why Generic Responses Fail: They don't address the specific issues raised by the issuing bank.

• Tailoring Evidence to the Specific Code Requirements: Provide only the evidence that is relevant to the reason code.

• Code-Specific Response Templates: Create templates for each common reason code to streamline your response process.

  
  

Insight 4: Reason Codes Change—Stay Updated

• Card Networks Periodically Update Codes and Rules: Stay informed about changes to avoid using outdated information.

• Example: Visa's 2018 reason code consolidation.

• How to Stay Current: Subscribe to card network bulletins and industry resources.

  
  

Insight 5: Some Codes Are Auto-Fought by Your Acquirer

• Certain Simple Codes (Like Duplicates) Are Handled Automatically: Your acquiring bank may automatically fight certain chargebacks on your behalf.

• What This Means for Your Response Strategy: You may not need to provide evidence for these chargebacks.

• When You Still Need to Provide Evidence: If the auto-fight is unsuccessful, you'll need to provide evidence to support your case.