Managing disputes and chargebacks can be tricky for merchants, especially with American Express cards. It has a completely different process compared to other major credit cards. If you want to know how to navigate through amex disputes and chargebacks, keep reading ahead.
What Happens During the Dispute Process?
When a cardholder disputes a transaction, Amex initiates an inquiry with the merchant. This process, known as a dispute, is the first step before a chargeback may occur. During this phase, the cardholder's claim questions the legitimacy of a charge, which can be due to several reasons, such as unrecognized transactions, dissatisfaction with the product or service, or billing errors.
Once a dispute is raised, the merchant is notified and given an opportunity to respond. The merchant must provide evidence to validate the transaction. If the merchant’s response satisfies Amex, the dispute is resolved in the merchant’s favor. However, if the evidence is insufficient, the dispute may escalate to a chargeback.
The Different Amex Reason Codes
There are a plethora of reasons as to why customers dispute transactions. As the card issuer, American Express categorizes these into different reason codes.
There are five categories for these chargeback reason codes: authorization, card members disputes, fraud, processing errors, and others.
Each chargeback comes with its own set of prevention techniques that are helpful for merchants to study. These codes help merchants understand why a chargeback was issued and how to address it.
Some of the common Amex reason codes are listed below:
- A01: Unrecognized Charge
- C02: Goods/Services Not Received
- C04: Goods/Services Returned or Refused
- F24: Credit Not Processed
- F29: Cancelled Recurring Billing
- R13: No Reply
- M01: Chargeback Authorization
Understanding these reason codes is important for merchants to give an effective response to disputes and avoid potential chargebacks.
The Chargeback Process for Merchants
Being on the other side of the dispute doesn’t necessarily mean that you’re on the losing team. Understanding the Amex chargeback process for merchants allows them to defend their side and protect their reputation and revenue. By knowing how the process works, merchants can effectively respond to disputes, minimize the risk of chargebacks, and protect their business from unnecessary financial strain.
Review the Chargeback Notification
If a chargeback has been escalated, you’ll receive a chargeback notification from Amex. Different card networks, including American Express, Visa, and Mastercard, have their own unique processes for handling chargebacks. Make sure to thoroughly read and go over the information provided before you decide to do something.
Identify the Reason for the Chargeback
Pinpoint the exact reason as to why the chargeback happened. Keep in mind that you have to tailor your response in order to address the concern raised by the cardholder, such as a situation where the merchant failed to deliver goods or services as expected. Having a generic response is not the best route to take.
Gather the Necessary Documentation
Collect all the sufficient evidence for this case. This can be invoices, sales receipts, shipping information, and address information. These documents are usually already accessible in the file.
Create a Thorough Response
This step is very important; write a detailed response letter that acknowledges the cardholder's claim and presents the most comprehensive case. Don’t forget to submit your documentation to prove your side.
Submit
Submit your response to Amex. Take note of the deadline to ensure your response isn't delayed. If you fail to submit your response on time, it will automatically result in your loss of the dispute.
Keep an Open Communication
Maintaining an open and respectful communication with the cardholder throughout the dispute process is highly recommended as it shows your efforts in addressing the customer's concerns.
Restricted Business Categories
There are several business models that aren’t authorized to accept card payments from Amex. There are several business models that aren’t authorized to accept American Express cards. Below is a list of business types that are prohibited:
- Adult Entertainment
- Check Cashing Services
- Debt Collection
- Unsolicited Door-to-Door Sales
- Escort Services
- Unlicensed Massage Parlors
- Financial Services (e.g., foreign exchange, mutual funds)
- Future Investments (e.g., horse breeding, precious metals, stock market)
- Gambling (e.g., casinos, betting, online gambling)
- Marijuana-Related Businesses (e.g., manufacturing, processing, distribution)
- Pyramid Schemes (MLM)
- Timeshare Sales
How Long Does an American Express Dispute Process Take?
Majority of disputes under AmEx are usually resolved within 30 days. American Express operates in dual roles as both an issuing bank and sometimes a processor, which allows them to handle transaction disputes differently compared to other card networks. However, it can depend on the complexity of the situation, it is possible to extend after a month.
How to Prevent American Express Chargebacks
Winning an Amex Dispute requires a strong strategy. However, the best way for merchants to fight against these chargebacks is to prevent them from happening initially. One important factor of chargeback prevention is maintaining clear communication with the customer. Here are some examples merchants should abide by:
- Make sure their customer support is easily reachable and clear enough for customers to access in different areas
- Display the return or exchange policy and other terms of service before the checkout process.
- Always require the card identification number, AKA the four-digit security code found on the card face for transactions that don’t require the physical card.
- Use the Automated Address Verification service (the American Express version of AVS) to verify card member information.
- Immediately process the credits when needed, and inform card members of the status of their refund (which is much better than a chargeback)
- Implement fraud prevention strategies for card not present transactions.
- Ensure the use of a secure payment method to reduce the risk of fraud.
Following these practices can help prevent some disputes from happening. That being said, every merchant needs an efficient chargeback management strategy to be able to tackle the issue from different perspectives.
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