Chargeback Lifecycle
Last Updated: 2025-02-17 Status: Complete
Understanding the complete chargeback lifecycle is essential for effective dispute management. Each stage has specific timeframes, responsibilities, and decision points.
Quick Reference
| Stage | Visa Timeframe | Mastercard Timeframe | Who Acts |
|---|---|---|---|
| Filing Window | 120 days | 120 days | Cardholder |
| First Chargeback | Immediate | Immediate | Issuer |
| Representment | 30 days | 45 days | Merchant |
| Pre-Arbitration | 30 days | 45 days | Issuer |
| Arbitration | 10 days | 45 days | Network |
Stage 1: Dispute Initiation
The lifecycle begins when a cardholder contacts their issuing bank to dispute a transaction.
Cardholder Dispute Windows
| Network | Standard Disputes | Fraud | Services Not Rendered |
|---|---|---|---|
| Visa | 120 days | 120 days | 120 days from expected delivery |
| Mastercard | 120 days | 120 days | 120 days from expected delivery |
Common Dispute Triggers
| Trigger | Percentage | Example |
|---|---|---|
| True Fraud | 30-40% | Stolen card used online |
| Friendly Fraud | 40-50% | Cardholder forgot purchase |
| Merchant Error | 10-20% | Double charge, wrong amount |
| Service Issues | 10-15% | Not received, not as described |
Stage 2: First Chargeback
Once the issuer validates the dispute, they create a formal chargeback through the card network.
What Happens Financially
| Action | Amount | Timing |
|---|---|---|
| Transaction Reversed | Original amount | Immediate |
| Chargeback Fee | $15-100 | Immediate |
| Reserve Adjustment | Varies | If applicable |
PayFac First Chargeback Actions
- Debit Sub-Merchant - Immediately debit transaction amount + fee
- Notify Merchant - Send chargeback notification with deadline
- Start Timer - Track response deadline
- Request Evidence - Ask merchant for documentation
- Update Metrics - Increment chargeback count and ratio
Stage 3: Representment
The merchant can dispute the chargeback by submitting compelling evidence to prove the transaction was valid.
Representment Deadlines
| Network | Standard | From Chargeback Date |
|---|---|---|
| Visa | 30 days | Calendar days |
| Mastercard | 45 days | Calendar days |
Missing the representment deadline means automatic loss. The chargeback cannot be disputed after the deadline passes.
When to Represent vs. Accept
| Factor | Represent | Accept |
|---|---|---|
| Strong Evidence | Yes | No |
| Win Probability > 50% | Yes | Maybe |
| Transaction Value | High | Low |
| Reason Code | Service/Auth | True Fraud |
| Operational Cost | Justified | Not Worth It |
Win Rates by Category
| Reason Category | Average Win Rate | Notes |
|---|---|---|
| Fraud (10.x/48xx) | 20-30% | Requires 3DS, device data |
| Authorization (11.x) | 40-50% | Auth code evidence helps |
| Processing (12.x) | 60-70% | Usually clear evidence |
| Consumer (13.x) | 40-60% | Depends on documentation |
Stage 4: Pre-Arbitration
If the issuer rejects the representment, they can initiate pre-arbitration—a second review before formal arbitration.
Pre-Arbitration Deadlines
| Network | Response Window | From Pre-Arb Notice |
|---|---|---|
| Visa | 30 days | Calendar days |
| Mastercard | 45 days | Calendar days |
Pre-Arbitration Options
| Option | When to Use | Outcome |
|---|---|---|
| Accept | Weak case, low value | Chargeback final |
| New Evidence | Have additional proof | Continue dispute |
| Arbitration | Strong case, high value | Network decides |
Stage 5: Arbitration
Arbitration is the final stage where the card network makes a binding decision.
Arbitration Costs
| Network | Filing Fee | Losing Party Pays |
|---|---|---|
| Visa | $500 | Yes + fees |
| Mastercard | $500 | Yes + fees |
Only pursue arbitration when:
- Transaction value > $500 (to cover filing fee)
- Evidence is compelling
- Win probability > 70%
Arbitration Timeline
| Phase | Visa | Mastercard |
|---|---|---|
| Filing Deadline | 10 days from pre-arb | 45 days |
| Network Review | 30-60 days | 30-60 days |
| Final Decision | Binding | Binding |
Complete Timeline Example
Here's a typical chargeback lifecycle from start to finish:
Timeline Summary
| From | To | Days |
|---|---|---|
| Transaction | Dispute Filed | 0-120 |
| Dispute | First Chargeback | 1-3 |
| Chargeback | Representment | 0-30 |
| Representment | Issuer Decision | 14-30 |
| Pre-Arb Filed | Response | 0-30 |
| Arbitration Filed | Decision | 30-60 |
| Total Possible | 180-270 days |
Lifecycle by Outcome
Scenario 1: Merchant Accepts
Timeline: 30 days Cost: Transaction amount + chargeback fee
Scenario 2: Representment Win
Timeline: 45-60 days Cost: Operational cost only
Scenario 3: Full Dispute (Arbitration)
Timeline: 120-180 days Cost: $500 filing + potential loss
PayFac Lifecycle Management
System Requirements
| Capability | Purpose |
|---|---|
| Deadline Tracking | Never miss response windows |
| Evidence Repository | Store and retrieve documents |
| Workflow Automation | Route to right team members |
| Communication | Notify merchants, gather evidence |
| Reporting | Track ratios, win rates |
Automated Actions
| Trigger | Action |
|---|---|
| Chargeback Received | Debit sub-merchant, send notification |
| 7 Days Before Deadline | Escalation notification |
| Representment Submitted | Update status, stop deadline timer |
| Issuer Decision | Credit/debit sub-merchant as appropriate |
Related Topics
- Reason Codes - Understanding why chargebacks are filed
- Representment - Building winning cases
- Network Programs - Consequences of excessive chargebacks
Ecosystem Context:
- PayFac Position - Why PayFacs have first-line chargeback liability
- Acquiring Banks - Acquirer's role in the liability chain