What Is the Time Limit on Chargebacks?

Chargebacks disputes are an unavoidable part of ecommerce for online retailers. Mastercard estimated that 2023 saw 238 million chargebacks in the global ecosystem and an average chargeback cost $191 last year. Further, merchants are subject to tight deadlines and specific documentation requirements to dispute a chargeback. Even the slightest delayed response can result in the extra penalties, expensive fees and lost claims that can be devastating to a growing business.

Understanding those time limits, and how credit card chargeback dispute processes work, is necessary to protect your business’s revenue and reputation. Here’s what you need to know about each of the five major payment solutions.

Visa

Visa cardholders typically have up to 120 days from the original transaction or expected delivery date to file a dispute. While this is the general time limit, there are instances where the deadline may be shorter or longer. 

What dictates the chargeback timeline is the reason code — a code that clearly identifies why a customer is disputing a transaction. The 120-day window is the standard maximum when reason codes fall within the Fraud, Consumer Dispute or Processing-related categories. However, there are some exceptions. 

For Invalid Data in the Processing-related category, the customer dispute period is only 75 days. Seventy-five days is also the limit for all reason codes in the Authorization-related category.  

For online merchants, the Visa chargeback time limit is a consistent 20 days, regardless of the reason code. Unlike cardholder time limits, which can fluctuate depending on the situation, this 20-day window applies uniformly across all Visa chargeback cases.

Compelling Evidence 3.0 for friendly fraud

As Visa acts to reduce all types of fraud, the company’s Compelling Evidence 3.0 (CE3.0) solution is designed to relieve merchants of the burden of friendly fraud chargeback losses. CE3.0 adds a set of checks and balances to accurately identify transactions authorized by the cardholder, not an unauthorized third party. 

If merchants provide at least three of the following evidentiary data points, the liability shifts from the business to the issuer, and the dispute is over: 

• Email address
• Shipping address 
• IP address
• User login
• Device ID/ device fingerprint 

Mastercard

Mastercard follows a similar timeline, again dictated by the type of dispute. Generally, issuers and cardholders must file chargebacks within 120 days of the date the original transaction was processed. 

Like Visa, several Mastercard chargeback codes have shorter timeframes, such as:

• Authorization-related chargebacks have a chargeback time limit of 90 days.
• Point of Interaction Errors, like a single transaction being charged multiple times, also have a time limit of 90 days.
• Cardholder disputes in the United States that aren’t classified elsewhere must be filed within 60 or 120 days.

Banks and businesses generally have up to 45 days to respond to each phase of the chargeback process.

Mastercard Collaboration

At the end of 2021, Mastercard added a pre-dispute, or collaboration, stage to its dispute resolution process to pause disputes before initiating the chargeback process. Businesses using Mastercard Collaboration have four options:

• Accept the dispute and request Mastercard to refund the issuer.
• Inform Mastercard that the disputed transaction has already been refunded.
• Accept the dispute with notice that a refund will be processed to the cardholder by the business.
• Reject the dispute; issuer can then respond with a chargeback if warranted. 

Collaboration gives the merchant the opportunity to decide whether it makes more sense to dispute a chargeback or simply refund the customer. Opting to refund the transaction may be the better call to keep your chargeback-to-transaction ratio low. Also, with advanced warning of a dispute, you may be able to stop fulfillment of the order, saving you the cost of goods or services.

However, keep in mind that the business must act within a firm 72-hour time limit for the collaboration process, otherwise the paused dispute will be rejected automatically, resulting in a chargeback.

Mastercard MATCH 

One compelling reason to maintain a low chargeback-to-transaction ratio is to avoid ending up on the Mastercard Alert to Control High-risk Merchants (MATCH) list. This “blacklist” is a database of business owners whose accounts have been terminated or deemed a significant risk for payment processors. Once on the MATCH list, a business would have to wait five years to be returned to normal status, so all efforts to reduce chargebacks before they happen are well worth the time. 

PayPal

PayPal prefers handling disputes in-house through the PayPal Resolution Center. However, should a customer reject that route and contact their bank directly for a refund, the dispute will be governed by the cardholder’s issuing bank rather than PayPal.

In the Resolution Center process, the buyer has 180 days from the transaction date to initiate a transaction dispute. Once initiated, the buyer and the seller then have 20 days to work together for a resolution to the dispute, either via a refund, reshipment, or other solution. After those 20 days, if the dispute is not escalated or resolved, PayPal will automatically close the dispute.

From dispute to claim

The buyer can escalate the dispute to a claim at any time during the 20-day dispute period. However, PayPal only allows two types of claims, and both have specific time limits: 

Items Not Received claim

• Seller has 10 days to respond to the claim. 
  • After 10 days with no seller response, PayPal will rule in favor of the buyer and withdraw the funds from the business’s account.
• Buyers should respond to the seller within three days.
• If this exchange doesn’t resolve the claim, PayPal will decide the outcome of the dispute, typically within five to 10 days. 

Item Significantly Not as Described claim

• Seller has 10 days to respond to the claim. 
• If not resolved by the seller’s response, PayPal obtains additional information from the buyer and seller as needed, reviews the case and decides the outcome, usually within five days.
• For a refund to be processed, the buyer must return the item within 10 days. 
• PayPal verifies the return and within five days, closes the claim. 

PayPal reports that while most claims are investigated in fewer than 14 days, it can take 30 days or more to decide the outcome of a claim.

The following two payment solutions, American Express and Discover, are both card networks and issuing banks. Therefore, they are motivated to keep their customers happy and resolve disputes in their favor. Businesses should be mindful of staying within dispute time limits. 

American Express

American Express (Amex) has joined the other payment solutions and is offering card members up to 120 days from the transaction date to dispute a charge. However, members are limited to just two disputes per charge in most cases and time limits may extend for some dispute categories.

These three reason codes have extended or undefined time limits:

• Goods/Services Returned or Refused — This code has no fixed time limit, as response timelines may be impacted by shipping times for refused goods, business response times and other factors.
• Goods/Services Canceled — If the member claims the order was canceled, but the business failed to process a cancellation, a dispute may arise months later, depending on the business’s billing process, automatic renewal terms, subscription practices, etc. Therefore, the 120-day time limit does not apply.

• Goods/Services Not Received or Only Partially Received — Because items may have been shipped in multiple shipments or other aspects of the business’s shipping practices, Amex allows more than 120 days to file a dispute.

Amex will work directly with the member to resolve the dispute before reaching out to the business. Should the member move forward with the dispute, the business has 20 days to respond with supporting documentation. 

Substitute Receipts

Amex reports that it helps resolve 90.4% of disputes due to “does not recognize” transactions by assisting members with its Substitute Receipt capability. In those cases, AMEX can resolve the dispute without needing to contact the business.

CID mismatch policy change

As of April 2024, Amex has shifted the liability for approved CNP orders with a CID mismatch to Amex rather than the business. CID data entry errors often cause customers to abandon carts rather than re-enter their data, so this liability shift will create a better customer experience and help businesses approve more orders.

Discover

Similar to the other cards, Discover organizes their chargeback reason codes in categories:

• Cardholder Dispute
• Authorization
• Processing Errors
• Not Classified
• Fraud

The time limit of 120 days to file a dispute applies across all code categories, with no exceptions. 

The Discover Card dispute process

Discover Card’s dispute process is also a little different since the company acts as both the issuer and card network. With an abundance of existing customer transaction data available for review, Discover can make an immediate determination if a dispute is valid, that the customer’s claim is legitimate, and issue a chargeback.

Should that data be inconclusive, a Ticket Retrieval Request (TRR) allows the business an opportunity to provide additional information to remedy the dispute without going through the official chargeback process. Retailers should be aware that TRRs could have a fee attached, although it is likely to be less expensive than the cost of a chargeback.

If Discover doesn’t hear from the business after a TRR, the claim will be escalated to a chargeback and the network will assess additional fees as a result.

Tips to Avoid Chargebacks

As this article makes clear, staying on top of all the varying reason codes and dispute or claim time limits could be a full-time job. That’s in addition to the time needed to research and respond to each chargeback. Clearly, for online retailers, it is worth your time to prevent chargebacks before they happen.

Here are some tips to protect your online business from the common causes of chargebacks:

Describe products thoroughly

Customers don’t like receiving an item that doesn’t look or function like what was described online. 

Respond promptly to customer questions

Proactively address customer questions or concerns via email, a customer service phone line, or online chat before frustration can turn to chargeback.

Provide delivery updates

Keep customers informed when to expect their items and when an order has shipped, then confirm that it has been delivered. 

Make subscription payments clear

Give customers plenty of advance notice each time a subscription renews, and provide ample details about what customers can expect to see on their credit card statements. 

Rely on a comprehensive chargeback management solution

Even with an effective fraud prevention system in place, chargebacks can still occur. That’s why it’s important to consider a comprehensive chargeback protection and management solution. By implementing a customized chargeback management strategy, ecommerce businesses can protect themselves from the increasing threat of fraud while positioning themselves for long-term financial success.

At ClearSale, we understand the urgency of protecting your revenue from costly chargebacks without risking false declines. With our proven experience, you can confidently accept more transactions without fear of damaging your business. Don’t wait—contact us today to see how easy it is to get started and secure your business's future.