As a merchant who accepts Discover cards, it's important to be aware of the chargeback process for card disputes and the unique time limits that apply to Discover chargebacks. This guide will provide you with an overview of what to expect if a customer initiates a chargeback against your business so that you can be prepared to respond appropriately and protect your bottom line.
Chargebacks made using Discover cards are processed slightly differently than those made with other major credit cards. Unlike other networks like Visa and Mastercard, Discover acts as both the network through which the transaction was processed and the issuer of the card used in the transaction in most cases. This means that Discover routinely handles both the cardholder's credit card account and the chargeback claim, rather than working with a card issuer. This allows them to have more control over the chargeback process and take a more proactive stance in preventing and resolving disputes.
Unlike Mastercard and Visa, Discover uses retrieval requests whenever there isn't sufficient evidence to warrant a chargeback. Retrieval requests are used to collect information about the transaction from the merchant before making a decision about whether or not to issue a chargeback. This is done in an effort to give merchants a chance to resolve the dispute without going through the formal, and often costly, chargeback process. If the retrieval request is unsuccessful or the merchant doesn't respond within the required timeframe, Discover will move forward with issuing a chargeback.
If a dispute has a strong enough basis to warrant a chargeback, Discover will send a chargeback notice to the merchant along with the reason code for the chargeback. From there, a merchant can accept the chargeback or take action through the representment process to attempt to have the chargeback reversed. Unlike other networks who encourage merchants to contact the customer first to try to resolve the dispute, Discover's chargeback rules state that merchants are not allowed to contact the cardholder once a chargeback has been initiated. This is because Discover takes the position that their cardholders have already tried to work things out with the merchant and were unsuccessful. Because Discover is the issuer and the network, decisions about representment are usually final and binding.
There are two important time limits to be aware of when it comes to Discover chargebacks: the first is the time limit for filing a chargeback, and the second is the time limit for responding to a chargeback claim or ticket retrieval request. According to Discover, cardholders officially have 120 days from the date of the transaction to initiate a chargeback, although the network may accept claims filed outside of that window on a case-by-case basis. If a dispute is filed with Discover and a ticket retrieval request is sent, the merchant has just five calendar days to respond with the requested information. Merchants will have an additional 20 days to provide supporting documentation for any subsequent requests or appeals.
If Discover deems there is sufficient evidence for the dispute and a chargeback is issued, merchants will have just 20 days to submit additional evidence to support their case through the representment process. This is a shorter timeframe than what is given by other networks, so it's important for merchants to act quickly after receiving a chargeback notice. If a dispute requires arbitration, merchants will have just 30 days to submit their case. It should be noted that true time limits are often less than what Discover uses as acquirers, processors, and issuers often have their own internal timelines that they must adhere to. If merchants don't have a system in place to handle disputes quickly, they may find that they're unable to meet the required deadlines and ultimately lose the chargeback.
If a merchant receives too many chargebacks, Discover may terminate their merchant account agreement and close their account. Merchants may be placed on the Terminated Merchant File (TMF) which will make it difficult, if not impossible, to get approved for a merchant account with another acquirer. Before being placed on the TMF, merchants will usually go through a monitoring period during which they'll be closely scrutinized by Discover. While there is no specific chargeback threshold that will result in a merchant being placed on the TMF, Discover generally considers anything over one percent to be excessive. If a merchant is unable to bring their chargeback rate below the acceptable level during this time, their account will likely be terminated, typically following a litany of chargeback fees in the process.
As with chargebacks from other card networks, Discover chargebacks can be costly and time-consuming for merchants to deal with, so it's important for merchants to take steps to prevent them whenever possible. Merchants who accept Discover cards should regularly review their chargeback prevention practices and make sure they're taking advantage of all the tools available to them, such as chargeback alerts and deflection services. When a chargeback does occur, merchants should take action immediately to try to reverse the chargeback through the representment process. Time is of the essence when it comes to Discover chargebacks, so merchants need to be prepared to act quickly to give themselves the best chance of winning.
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Yes, you can contact Discover or the issuing bank to dispute a transaction. Cardholders have 120 days from the transaction date to file a dispute.
Once Discover sends a ticket reversal or issues a chargeback, the merchant has five calendar days to submit requested documentation and 20 days for subsequent document requests.
Discover gives merchants 15 days to refund a transaction. Once this is done, the refund takes three to seven days to be reflected in your account.
When Discover issues a chargeback, a merchant can fight it by presenting compelling evidence. If the merchant's chargeback response is on time and compelling, the chargeback is reversed. If not, the chargeback stands.
Discover stopped offering purchase protection to its personal cardholders in 2018, and it's currently the only card company without this benefit. The benefit covered damaged or stolen items up to $500 for 90 days following the transaction.
Discover offers merchandise protection for cardholders with their business card. Discover insures purchases from damage and theft for 90 days from the date of purchase.
Mastercard and Visa are only card networks, while Discover functions as a card network and a card issuer. This means Discover handles the cardholders' accounts and chargeback claims instead of having a card issuer as an intermediary.