In this guide, I’ll walk you through everything you need to know about Visa’s chargeback policies, from time limits and thresholds to the dispute resolution process. Whether you’re a new business owner or a seasoned merchant looking to minimize your chargeback ratio, this information will help you protect your bottom line and maintain a healthy relationship with card networks.
What Are Visa Chargebacks?
A Visa chargeback happens when a cardholder disputes a transaction with their issuing bank instead of contacting you directly for a refund. The bank then initiates a formal dispute process through Visa’s network, essentially pulling the funds from your merchant account while the case is investigated.
Chargebacks were originally designed as a consumer protection mechanism against fraud or merchant misconduct. However, they’ve unfortunately become a source of “friendly fraud” when customers bypass you and go straight to their bank for various reasons—sometimes legitimately, sometimes not.
Common Reasons for Visa Chargebacks
- Unauthorized transactions (actual fraud)
- Products not received or services not rendered
- Items significantly different from description
- Duplicate charges or incorrect amounts
- Subscription cancellations that weren’t honored
- Technical errors during processing
Visa Chargeback Time Limits
One of the most important aspects of Visa chargeback rules to understand is the timeframe in which disputes can occur. Knowing these limits helps you prepare and respond effectively.
For Cardholders:
Visa generally allows cardholders 120 days from the transaction date to file a dispute. However, this can vary based on the type of dispute:
- For fraud claims: 120 days from transaction date
- For merchandise/service issues: 120 days from expected delivery date
- For recurring billing disputes: 120 days from the most recent charge
In some situations, this window can be as short as 75 days, depending on the specific circumstances and the cardholder’s bank policies.
For Merchants:
Once a dispute is filed, you typically have 30 calendar days to respond with compelling evidence. This is why having organized transaction records, customer communication logs, and delivery confirmations is absolutely crucial.
Understanding Visa Chargeback Thresholds
Visa maintains strict monitoring programs to ensure merchants keep chargebacks under control. Exceeding these thresholds can result in penalties, higher processing fees, or even account termination.
Current Visa Chargeback Thresholds:
- Standard threshold: 0.9% of transactions and fewer than 100 chargebacks monthly
- Excessive threshold: 1.8% of transactions and 1,000 or more chargebacks monthly
Your chargeback ratio is calculated by dividing the number of chargebacks by the total number of transactions in a given month. For example, if you processed 1,000 transactions and received 10 chargebacks, your ratio would be 1%.
Industry averages range from 0.56% to 1% globally, but these rates vary significantly by business type. High-risk industries like digital goods, gaming, and travel typically experience higher chargeback rates.
Visa Chargeback Categories and Reason Codes
Visa organizes disputes into four main categories, each with specific reason codes:
1. Fraud (10.x)
- 10.1: EMV Liability Shift Counterfeit Fraud
- 10.2: EMV Liability Shift Non-Counterfeit Fraud
- 10.3: Other Fraud – Card Present Environment
- 10.4: Other Fraud – Card Absent Environment
- 10.5: Visa Fraud Monitoring Program
2. Authorization (11.x)
- 11.1: Card Recovery Bulletin
- 11.2: Declined Authorization
- 11.3: No Authorization
3. Processing Errors (12.x)
- 12.1: Late Presentment
- 12.2: Incorrect Transaction Code
- 12.3: Incorrect Currency
- 12.4: Incorrect Account Number
- 12.5: Incorrect Amount
- 12.6: Duplicate Processing
- 12.7: Invalid Data
4. Consumer Disputes (13.x)
- 13.1: Merchandise/Services Not Received
- 13.2: Canceled Recurring Transaction
- 13.3: Not as Described or Defective Merchandise/Services
- 13.4: Counterfeit Merchandise
- 13.5: Misrepresentation
- 13.6: Credit Not Processed
- 13.7: Cancelled Merchandise/Services
- 13.8: Original Credit Transaction Not Accepted
- 13.9: Non-Receipt of Cash or Load Transaction Value
Understanding these codes helps you identify patterns in your chargebacks and address specific operational weaknesses.
Visa Chargeback Fees: The True Cost
When discussing Visa chargeback rules, we can’t ignore the financial impact. Each chargeback comes with multiple fees:
- Bank chargeback fee: $20-$50 per case (varies by acquiring bank)
- Operational costs: $15-$25 in internal processing time
- Potential program fees: Additional penalties if thresholds are exceeded
- Lost merchandise and shipping costs
- Sales revenue reversal
On average, for every $1 disputed, merchants lose $2.40 in combined fees, time, and merchandise. This means that $169.13 average chargeback actually costs you closer to $406.
Visa Claims Resolution (VCR) Process
In 2018, Visa introduced the Visa Claims Resolution initiative to streamline the dispute process and reduce resolution time. Under VCR, disputes follow one of two workflows:
Allocation Workflow (for Fraud and Authorization Issues)
- Visa automatically checks validity criteria
- If criteria are met, liability is immediately assigned
- Merchants can still challenge with compelling evidence
Collaboration Workflow (for Consumer Disputes and Processing Errors)
- Requires interaction between issuer and acquirer
- More documentation and evidence exchange
- Typically takes longer to resolve
The entire VCR process aims to resolve disputes within 30 days, significantly faster than the previous 46-day average.
How to Reduce Your Visa Chargeback Ratio
Based on my experience, here are proven strategies to keep your chargeback ratio healthy:
Prevention Best Practices
- Use clear merchant descriptors that customers will recognize on statements
- Implement strong fraud detection tools and AVS/CVV verification
- Offer excellent customer service with easy contact options
- Send shipping notifications with tracking information
- Have transparent return and cancellation policies
- Document all customer interactions and keep records for at least 540 days
When Disputes Occur
- Respond quickly with compelling evidence
- Use Visa’s Order Insight (previously called Visa Verify) to share transaction details
- Consider using Visa’s Rapid Dispute Resolution to address claims before they become chargebacks
- Analyze chargeback patterns to identify and fix operational weaknesses
Upcoming Changes: Visa Acquirer Monitoring Program (VAMP)
Starting April 2025, Visa will replace existing monitoring programs with the Visa Acquirer Monitoring Program (VAMP). This consolidated program will:
- Simplify merchant monitoring
- Provide clearer thresholds and warnings
- Establish more consistent enforcement
- Focus on high-risk merchant categories
This change signals Visa’s continued commitment to reducing fraud and improving the payment ecosystem for everyone.