Dispute
A customer's formal challenge to a charge, which may escalate into a chargeback.
A dispute is the process a cardholder starts when they don't recognise or disagree with a charge. The merchant can respond with evidence (representment); if unresolved it becomes a chargeback. Clear billing descriptors and responsive support prevent many disputes.
How it works
A cardholder rings the issuing bank, which assigns a reason code (fraud, goods not received, not as described, duplicate charge, subscription cancelled) and provisionally credits them. The issuer debits your acquiring bank, and that debit is the chargeback your processor passes on to you. You get a notice with a response deadline, often 7 to 21 days. From there you either accept the loss or submit representment evidence. Either side can escalate to pre-arbitration and network arbitration, where filing fees run into the hundreds of dollars and make escalating a small case a poor bet.
The money leaves on the notice, not on the outcome, and stays gone for weeks either way. Most processors charge a dispute fee of roughly $15 to $25 and keep it when you win. Below a certain order value, fighting costs more staff time than it recovers, so set a threshold: defend anything above it with evidence and accept the rest. The biggest avoidable cause is a billing descriptor nobody recognises, so put your trading name and a support phone number in it. Processors differ on ignored notices too, and where some accept liability for you and close the case, others still charge the fee.
Worked example
Day one: a customer disputes a $180 order as not received, and your processor debits the $180 plus a $15 dispute fee. You upload carrier tracking showing delivery to the AVS-matched billing address, the signed delivery confirmation and your terms. Six weeks later the issuer rules in your favour and the $180 comes back. The $15 stays with the processor. A win, and it still cost you the fee and an hour of admin.
Frequently asked questions
- How long does a dispute take to resolve?
- Most are settled 30 to 90 days after filing, but your own window inside that is much shorter: processors typically give you 7 to 21 days to upload evidence, and missing it is an automatic loss. The issuer then takes several weeks to rule. Add another one to three months if the case escalates to pre-arbitration or arbitration.
- If I refund the customer, will the dispute be dropped?
- Not automatically, and you can easily end up paying twice. By the time a dispute is filed the issuer has usually credited the cardholder already, so a refund on top hands them the money a second time and you rarely get it back. Refund before a dispute is raised, or answer the dispute with evidence that a refund was already issued rather than sending another one.
- What evidence wins a dispute?
- Proof that the genuine cardholder ordered the thing and received it. In practice: carrier tracking with delivery confirmation, an AVS and CVV match, the IP address and device used at checkout, timestamped acceptance of your terms, and your support messages. For subscriptions, add the cancellation policy and the date the customer last used the service.