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What happens if a merchant denies a chargeback?

A chargeback occurs when a credit card holder disputes a charge on their statement and asks the card issuer to remove it. There are many reasons a cardholder may file a chargeback, such as if the goods were defective, they didn’t receive the goods, or the transaction amount was incorrect. The card issuer then contacts the merchant to investigate the dispute.

Can a merchant deny a chargeback?

Yes, a merchant can deny a chargeback request and provide evidence to defend the charge. When a merchant receives a chargeback notice, they have the option to accept the chargeback or contest it. If the merchant has evidence showing the charge is valid, they can submit this to the card network in an attempt to reverse the chargeback.

Some common reasons a merchant may deny a chargeback include:

  • Proof of delivery – The merchant has documentation showing the product was shipped or service was provided.
  • User error – The cardholder made an error, such as entering the wrong shipping address or ordering the wrong product.
  • Service provided – The merchant fulfilled their end of the transaction by providing the purchased service.
  • No refund policy – The merchant has a no refund policy that the cardholder agreed to at the time of purchase.
  • Outside allowable time – The cardholder exceeded the allowable time period to dispute a charge per card network rules.

The merchant has a limited time to submit evidence to their payment processor or card network after receiving a chargeback notice. This is usually between 10-15 days. They will need compelling evidence to overturn the chargeback in their favor.

What happens when a merchant denies a chargeback?

Here is the general process when a merchant denies a chargeback:

  1. The cardholder initiates a chargeback request with their credit card issuer.
  2. The card issuer notifies the merchant’s bank or payment processor.
  3. The merchant reviews the dispute and submits a representment request within the allowable timeframe.
  4. The representment goes to the card issuer for review along with the merchant’s evidence.
  5. The card issuer evaluates the evidence and makes a determination to uphold or reverse the chargeback.
  6. If upheld, the funds are returned to the cardholder. If reversed, the charge remains with the cardholder.

A key part of this process is the representment stage where the merchant provides their rebuttal and evidence. The card issuer then carefully reviews the evidence from both sides and judges who made the stronger case. If the merchant provides compelling evidence, they have a good chance of reversing the chargeback in their favor.

What kind of evidence can a merchant provide?

There are a variety of documents and records a merchant can submit as representment evidence. Some examples include:

  • Receipts proving the cardholder made the purchase.
  • Signed proof of delivery document showing the customer received the goods.
  • Shipping confirmation showing when and where the product was shipped.
  • Email correspondence with the cardholder demonstrating they received the product or service.
  • Documentation showing the customer exceeded the refund period.
  • Records demonstrating the cardholder was advised of the merchant’s policies such as no refunds, no cancellations, etc.

Photographs, video footage, system records, and other detailed documentation can prove useful as well. The stronger the evidence, the better chance the merchant has to overturn the dispute. Any evidence should directly counter the cardholder’s claim in the chargeback.

What happens if the chargeback denial is rejected?

If the card issuer reviews the merchant’s evidence and rejections their representment, the chargeback will move forward. This means the funds for the disputed transaction get pulled back from the merchant’s bank and returned to the cardholder.

There are a few things that can happen when a merchant loses a chargeback:

  • The dollar amount of the transaction gets deducted from their merchant account.
  • A chargeback fee is applied by their credit card processor, usually $15-$100 per dispute.
  • The chargeback ratio for their account increases. Too high of a ratio can lead to fines, higher processing rates, or account termination.
  • The merchant is out the cost of the product or service provided.
  • For high risk industries, being held liable for a chargeback may violate their merchant account terms.

Losing a chargeback that a merchant felt was invalid can be frustrating. However, the card issuer has the final say in these disputes. Sometimes a merchant may have to accept a chargeback loss even if they disagree with the outcome.

Can a merchant resubmit a denied chargeback rebuttal?

In some cases, yes a merchant may be able to resubmit evidence if their initial representment is denied. Whether a second representment is allowed depends on the chargeback reason code and the card network (Visa, Mastercard, Discover, American Express).

For example, on Mastercard transactions, a second representment is possible if the merchant provides new compelling evidence that specifically addresses the denial reason cited by the card issuer. With Visa, a second representment is only allowed for very specific dispute types.

There are strict time frames to submit a second representment, usually between 10-30 days from the denial notification. The chances of getting a denial overturned on second representment are low. Most card networks allow no more than two representments per dispute.

Can a merchant be banned for too many chargebacks?

Yes, excessive chargebacks can lead to a merchant having their credit card processing privileges revoked. Card networks and processors monitor merchant chargeback rates closely.

While thresholds vary slightly, if a merchant consistently exceeds 1% ratio of chargebacks to total transactions, they run the risk of account termination. Some high risk industries have thresholds closer to 0.5%.

Here are some potential penalties for merchants with high chargeback rates:

  • Fines and fees for exceeding allowable chargeback ratio.
  • Forced reserve account – a percentage of sales held to offset potential losses.
  • Requiring guaranteed payments such as direct bank deposits.
  • Terminated ability to process credit card payments.
  • Blacklisted from having a merchant account in the future.

To avoid account closure, merchants should closely track their chargebacks, take preventive measures, and dispute invalid chargebacks when possible. Having excessive chargebacks generally indicates a problematic business model or non-compliance with card network rules.

Best practices for merchants to handle chargebacks

Here are some best practices merchants can follow when dealing with chargebacks:

  • Have clear return, refund, and cancellation policies.
  • Provide detailed receipts with all relevant transaction information.
  • Retain documentation proving delivery, service completion, or contract compliance.
  • Respond promptly to cardholder disputes before they become chargebacks.
  • Submit compelling evidence when contesting invalid chargebacks.
  • Track chargeback rate Key Performance Indicators (KPIs).
  • Continuously monitor account standing with processors.
  • Consider using chargeback mitigation services and technology.
  • Train customer service staff on chargeback prevention procedures.

Taking proactive steps to avoid and manage chargebacks is key to maintaining merchant account stability. With proper diligence, merchants can effectively navigate the chargeback process while minimizing losses and account risks.

The chargeback process summarized

In summary, here is how the chargeback process typically works when a merchant denies the dispute:

  1. Cardholder requests chargeback from card issuer.
  2. Issuer notifies merchant bank of dispute.
  3. Merchant has limited time to submit representment evidence.
  4. Issuer reviews merchant evidence and makes determination.
  5. If merchant evidence is insufficient, chargeback stands.
  6. If evidence overrides dispute, chargeback is reversed.
  7. In rare cases, a second representment may be allowed if first is denied.

Representment gives merchants a chance to fight invalid chargebacks. Strong evidence is key. Too many lost chargebacks can jeopardize the merchant account. Proper policies and diligence are important to manage the process.


Merchants have options when responding to chargeback disputes initiated by credit card holders. While chargebacks can sometimes be denied with compelling evidence, taking proactive steps to prevent them in the first place is ideal. Maintaining thorough records, reasonable policies, and organized processes enables merchants to minimize chargeback risks and keep their accounts in good standing.