How American Express and Discover Chargebacks Differ

How American Express and Discover Chargebacks Differ?

May 9, 2021
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by Ronen Shnidman

When people think of a credit card most will immediately think of Visa or Mastercard, the two most popular card networks. However, American Express and Discover have their own sizable user base with 20 percent and 4 percent of U.S. credit card purchase volume in 2018, respectively, according to data taken from the Nilson Report. What most consumers don’t know is that American Express and Discover are qualitatively different from Visa and Mastercard in their business models. This has ramifications for chargeback mitigation and the chargeback process as we at Justt know quite well.


‘Closed loop’ model


American Express and Discover operate under what is known as the “closed loop” model. This means the companies are not only the credit card processing networks but also the card issuers and the merchant acquirers. This presents advantages both in terms of increasing the potential revenue each card company can squeeze out of a transaction and in terms of the reduced complexity of setting up and maintaining the functioning of their networks.


While originally the sole issuer of their credit cards, American Express and Discover now have relationships with third party issuers similar to Visa and MasterCard. However, both companies still issue a majority of their cards in the U.S. directly and not through third parties. This is important since American Express and Discover make most of their money from the balances consumers hold on their credit cards and interchange fees. It also means that American Express and Discover underwrite and assume the risk for the debt of most of their cardholders. As a result, both credit card companies target more affluent cardholders who will spend more on their credit cards and are less likely to default.

The attractiveness of American Express and Discover to their cardholders rests on their reward programs and supposedly superior customer service. In the case of the Discover, cardholders also like that there is no annual membership fee.

On the acquiring side, both Visa and Mastercard cards are accepted by 52.9 million merchants worldwide while Discover has 44 million and American Express has 25.3 million, according to the Nilson Report. However, in the U.S. American Express and Discover have reached near parity in merchant acceptance for their cards alongside Visa and Mastercard. 


Quicker Amex chargeback process


Because American Express is typically the issuer for transactions on its card network the payment dispute process usually proceeds more quickly. In cases where the cardholder requests a chargeback and has strong evidence, American Express will immediately issue the chargeback. In situations that are unclear, American Express will send an inquiry to the merchant and give them 20 days to respond. If the merchant provides a sufficient reply to the inquiry the case is resolved, if not, it becomes a chargeback. 



After receipt of an immediate chargeback the merchant also has 20 days to respond. The merchant can then either not dispute the chargeback, show proof that it has already refunded the cardholder or submit evidence proving that the charge is valid.

If American Express doesn’t accept the merchant’s evidence, the chargeback becomes final. There is no pre-arbitration or arbitration stage to American Express chargebacks. Merchants get one chance only to reverse a chargeback.


Difference with Discover’s chargeback process


Discover differs from the other card networks in that its rules and regulations prohibit the merchant from contacting the cardholder regarding the payment dispute. Mastercard and Visa rules require the merchant to make a good faith attempt to resolve disputes directly with the cardholder. 

Otherwise, Discover is similar to American Express inasmuch as it is usually the card issuer. However, after the issuer has made the decision to file a chargeback, Discover allows the merchant or the issuer to appeal the decision to pre-arbitration and then proceed to arbitration. As a result, the Discover chargeback process is much longer than the American Express one.



For initial responses to a retrieval request or chargeback filing, the merchant has 20 days to respond. If you’re working with your payment service provider on the dispute, they may require documents sooner. Appealing the representment decision must be done within 30 calendar days. If the issuer appeals, you’ll have 20 days from notification of the appeal to submit additional documents. In the event of a dispute arbitration request for additional information, you’ll have 45 calendar days to provide any new compelling evidence. Once Discover receives documentation from both parties, it will rule on the arbitration within 15 business days. Altogether, that’s a 130-day chargeback lifecycle for Discover.


Simplifying chargeback mitigation


It can be hard to keep track of the different deadlines and chargeback processes for the different credit card networks. Yet, you don’t want to give away your hard-earned money. For this there are chargeback mitigation solutions that will take the work off your hands so you can focus on your business. Only one of them, Justt, is completely risk-free. We offer a success-based fee, which means your bottom-line can only improve.


Contact us to learn more about how Justt works

Amex & Discover Chargebacks FAQs


Is American Express good with chargebacks?

Merchants can only fight chargebacks on Amex cards related to first-party sources, including friendly fraud. If merchants try to represent transactions caused by merchant error or third-party fraud, Amex will reject the case. Generally, pre-arbitration and second chargeback phases aren't American Express' standard practice.

Is Discover good with chargebacks?

Discover follows a chargeback process similar to Visa and Mastercard. But because they function as the issuer, they already have the bulk of information, and the process is more straightforward. However, this also makes contesting a Discover chargeback harder.

What makes American Express different from Visa and Mastercard?

American Express functions as a payment network and a card issuer while Visa and Mastercard operate as payment networks and have other banks issue cards.

What is the advantage of Amex and Discover's closed-loop network?

The benefit of Amex and Discover's closed-loop network is that they can view every transaction in real time. On the other hand, Mastercard and Visa have limited access to cardholder data since banks are reluctant to share this information.

What are Amex and Discover chargeback time limits?

Typically Discover and Amex allow cardholders 120 days after the transaction date to file a chargeback. On the other hand, merchants have 20 days to respond to an inquiry.

How long do Discover chargebacks take?

The time taken depends on the situation. Some Discover chargebacks may take a couple of days, but if disputed, the process can take weeks or months.

What happens if I have too many Discover or Amex disputes?

If a merchant's Discover or Amex inquiry rate is high, any customer dispute is escalated to a chargeback. If the inquiry rate is still high, merchants might face additional restrictions.

Amex charges an excessive dispute fee, $5 per disputed charge for merchants in the Immediate Chargeback Program and $15 per disputed charge for those not in the program, respectively. On the other hand, Discover charges a $25 fine for any chargeback above the 100 monthly chargeback limit.


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