A Beginner’s Guide to Debit Card Chargebacks

I used to sell stuff online and had to prepare myself for dealing with chargebacks. We'll have to deal with them whether they’re from credit or debit cards.

I’ll explain this type of dispute and how it’s different from a credit card chargeback. Then, I’ll discuss how to deal with it and how to prevent it.

Let’s get this show on the road.

Key Takeaways

• A debit card chargeback has fewer protections than a credit card dispute.
• The longer a buyer waits to dispute an order, the more they’re liable for.
• You’re dealing with a bank’s money with credit cards; and the customer’s money with debit.
• The dispute process involves gathering and submitting evidence.
• Prevent debit card chargebacks by setting up alerts, fraud protection, and more.

What is a Debit Card Chargeback?

A debit card chargeback is a dispute process where cardholders request refunds for transactions. It allows customers to recover funds directly from their bank accounts. Chargebacks protect consumers from different types of charges on their debit cards.

It’s the same as a credit card chargeback. But it has different coverage because it falls under different protections.

No matter what, you (the merchant) will pay a chargeback fee. And you’ll have to go through the dispute process.

However:

If you win the dispute, then the payment processor may reimburse the disputed funds. I’ve only seen this policy with Shopify Payments.

Many banks will refer to chargebacks and disputes as the same thing. Thus, I might sometimes refer to a “chargeback” as a “dispute” in this guide.

The purpose of chargebacks is to give customers the rights to protect their purchases.

Though, many will often abuse this process through friendly fraud.

Apparently 1 in 4 customers do this [1].

There are other differences in the protections that debit and credit cards offer.

Let’s review them.

Summary: A debit card chargeback occurs when a customer files a complaint with their bank or card brand about fraud. The bank then decides whether to pull money from the seller’s account.

What are a Customer’s Rights for Debit Card Chargebacks?

Customers have specific rights regarding debit card chargebacks. They can dispute unauthorized or incorrect transactions on their debit cards.

These rights vary by region and bank policies.

Generally, here’s what rights customers can expect:

• Right to Dispute: Can dispute orders if they believe there was fraud or other problems.
  • They must typically file the dispute within 60 days of the transaction.
• Refund Rights: If the dispute is valid, shoppers are entitled to a refund.
  • The bank will temporarily credit the customer’s account while they investigate.
• Protection Against Liability: Can’t be held liable for unauthorized transactions.
  • Their liability might be limited, depending on how soon they report the charge.
• Right to Appeal: If the bank rules against the buyer, they have the right to appeal the decision.
  • The customer must provide additional evidence to support their claim.

* The actual time limit a customer has to file will vary by card network.

Let’s compare a buyer’s rights with a debit card to a credit card.

Summary: Rights include the ability to dispute transactions and receive a refund if they’re illegitimate.

How are Debit Card Chargebacks Different From Credit Card Chargebacks?

Credit cards offer stronger fraud protection by law. Cardholders are only liable for up to $50 of unauthorized transactions.

Banks cover the rest or use chargebacks to recover funds.

Debit cards have less protection under the Electronic Funds Transfer Act:

• Users must report missing cards within 2 days to limit liability to $50.
• After that, they could be responsible for up to $500 in losses.
• Waiting over 60 days may mean full liability for unauthorized charges.

Prepaid cards now have similar protection to debit cards, but only if registered.

This change happened in 2019.

Before that, prepaid cards had limited or no fraud protection. The new rules don't apply to gift cards or certain specialized cards.

Customers using credit cards have more protection and may be more likely to dispute charges.

Debit card users might be more cautious about disputes due to potential liability. This can affect how you handle transactions and customer service.

Be aware that the chargeback process varies between card types.

Credit card chargebacks often favor the shopper.

Debit card chargebacks may require more proof from the consumer. This can impact how merchants prepare for and respond to disputes.

Why?

Because with a debit card, a customer loses their money due to fraud. Regarding credit cards, the bank loses their money (via credit).

Thus. It’s in the bank’s best interest to have more protections in place.

What is the chargeback process?

Summary: Debit cards have less protections and have stricter timelines to file chargebacks.

Debit Card Chargeback Process

Here’s the typical chargeback process:

1. Dispute Initiation: Shopper contacts their issuer to dispute a charge.
2. Investigation: Financial institution investigates the dispute.
3. Evidence Submission: Merchant provides evidence to support the charge.
4. Decision: Issuer decides in favor of the customer or seller.
   1. Shopper Wins: Chargeback stands.
   2. Seller Wins: Disputed funds return to merchant’s account.

This process typically takes 120 takes to complete. But. It’ll vary by payment processor and card brand.

The process for debit and credit cards is the same.

Both involve a customer disputing a charge, an investigation by the financial institution, and a decision.

Sometimes, the process includes additional steps like arbitration, second chargebacks, and inquiries.

These will vary by card brand.

You’ll have to check out our dispute process guide to learn more. I don’t have enough room for that information in this piece.

Let’s talk about time limits (one of the most important aspects).

Summary: The chargeback process involves the customer filing a dispute. The issuer then makes a decision based on the presented information.

Debit Card Chargeback Time Limits

Debit card chargeback time limits vary. They depend on the bank and card network rules. The specific claim type also affects the time limit.

Generally:

Cardholders have at least 60 days to file a dispute.

After which, they’re fully liable for the fraud amount.

Banks can choose to pursue claims beyond this 60-day window. This is at their discretion. Some may extend the time limit for certain cases.

For merchants, this means staying prepared for potential disputes.

Keep transaction records for several months. Be ready to respond quickly to chargeback claims.

This time limit will also vary by country.

As each nation will have varying laws that address chargebacks.

For instance, if you’re in the United Kingdom, you should have up to 120 days [2].

Let’s see the reasons these chargebacks happen.

Summary: Time limits are usually within 60 days.

Common Reasons for Debit Card Chargebacks

What debit card chargebacks cover will depend on your country’s chargeback laws.

For instance, there’s Section 75 in the UK.

This is available whenever the seller has violated a contract with the merchant. For instance, going against their own terms of service.

These reasons can include:

• Goods and services aren’t as described.
• Seller doesn’t deliver goods.
• Duplicate charges.

However:

These protections only apply to purchases between £100 and £30,000.

Other reasons for a debit card chargeback could include:

• Fraud: Someone uses a stolen card or card details.
• Billing errors: You charged the buyer the wrong amount.
• Product not received: Customer claims they never received the goods or services they paid for.
• Product not as described: Item delivered doesn’t match the description.
• Canceled recurring payments: User cancels a recurring payment, but still gets charged.
• Technical issues: Transaction wasn’t done incorrectly due to system errors.

Do you remember when I talked about friendly fraud?

If you’re unfamiliar with what it is, it’s when a customer disputes a legitimate transaction.

Sometimes, their 5-year-old nephew purchases a microtransaction through their phone.

Others, they’re trying to defraud you.

Here are some situations that don’t qualify for chargebacks.

Summary: Typical chargeback reasons include fraud, merchant error, and friendly fraud.

Invalid Reasons for Debit Card Chargebacks

Here are reasons a shopper can’t file a chargeback:

• Buyer’s remorse: Shopper changes their mind after purchase.

• Unrecognized transaction: Customer forgets they made the purchase.
• Dissatisfaction with product: Buyer didn’t like what they received.
• Return without authorization: They return the item without following the merchant's return policy.
• Discounts not applied: The customer expected a discount that wasn’t applicable.
• Failed Negotiation: They attempt a dispute after failing to negotiate a refund with the seller.

If you suspect the customer’s disputing an order because of one of these reasons, right the chargeback.

Now that we know what they are and why they happen let’s fight them.

Summary: Customers can’t dispute orders due to buyer’s remorse and forgetting they made a purchase.

How to Fight a Debit Card Chargeback

Here’s how you’d deal with a debit card dispute as a seller:

1. Know the reason code
2. Resolve the dispute early
3. Collect evidence
4. Meet deadlines

You’d also do this with credit card chargebacks. Thus, if you already know what to do, you don’t need to read further.

However:

You might find a hidden gem or 2 in these sections.

Let’s dive in.

1. Understand the Reason Code

Identify the chargeback reason code from the customer’s bank.

This code explains the reason behind the dispute. Each card network, like Visa or Mastercard, uses different codes for specific situations.

Refer to these guides for more information:

• Visa
• Mastercard
• Discover/JCB
• American Express

* Discover reason codes apply to transactions done in USD with a JCB card.

Anyway:

Knowing the code helps you gather relevant evidence.

For example, a fraud-related reason code may indicate unauthorized card use.

In such cases, you should evaluate whether it’s worth contesting the chargeback. Understanding the reason code saves you time and resources by helping you make informed decisions.

2. Resolve Disputes Early

Try resolving disputes directly with customers before they escalate to chargebacks.

Contact the customer and address their concerns.

Consider offering partial or full refunds to settle the matter. Resolving disputes early avoids chargeback fees and maintains a positive customer relationship.

If your bank already told you there’s a chargeback, your goal is to get the customer to withdraw their dispute.

Platforms like Shopify will reimburse you the chargeback fee if you win a dispute. And they consider a “won” dispute as withdrawn.

3. Collect Supporting Evidence

Build a representment package.

Prepare a rebuttal letter explaining why the chargeback is invalid.

Include key transaction details and supporting documents like receipts, communication records, and delivery confirmation.

Tailor the evidence to your industry and situation.

Submit this evidence to your acquiring bank before the deadline.

Your payment processor will guide you on how to submit your package. Most of the time, it’s done through their dispute management platforms.

4. Meet Deadlines

Chargeback processes have strict deadlines.

Check these deadlines with your payment processor.

Here are examples of time limits for different card brands:

• Discover: 5 days
  • Retrieval requests: 20 days
• American Express: 20 days for inquiries and chargebacks
• Mastercard: 45 days
  • Second chargeback: 30 days
• Visa: 20 days

Ignoring them can result in an automatic loss. 

Respond promptly to chargeback notifications to avoid missing critical deadlines.

There’s not much you can do to fight a debit card chargeback. It’s the same as fighting a credit card one.

Your odds of winning a dispute will depend on a few factors.

A couple examples include:

• Industry: Consumer electronics have a lower win rate than apparel.
• Transaction value: Orders under $29.99 have a much higher win rate than ones $300 and up.
• Dispute type: Sellers win more friendly fraud disputes than true fraud.

The overall win rate is around 30% [3].

There’s no spell you can learn to increase your win rate.

There’s also no guru you can follow or course to buy.

Gather your evidence. Submit on time. And ensure you’ve been transparent with your customer.

You know what’s better than fighting chargebacks? Preventing them.

Strategies to Prevent Debit Card Chargebacks

The strategies I’ll focus on involve preventing debit card chargebacks in the following areas:

• Fraud
• Merchant error

Friendly fraud is the other main chargeback type. However. Many of the preventative methods I’ll include extend to friendly fraud.

Let’s begin with fraud.

1. Preventing Fraud Debit Card Chargebacks

Fraud makes up for 1% of chargebacks. But it only has a 9% dispute win rate for merchants.

Let’s begin with chargeback alerts.

These let you know when a customer has an issue with a transaction. Whether it’s from fraud or general dissatisfaction.

This allows you to refund a customer before the issue escalates to a chargeback. This is the easiest preventative step you can do since you just wait for alerts.

With some alert providers (e.g., RDR), they’ll automatically refund the customer.

Saving you time.

But you know what won’t save you time? Setting up alerts with the 3 main providers. And you will need at least 2 providers to have coverage across the main card brands.

We can help with that, though. The process could take less than 10 minutes to set up.

See how we can help.

From there, use fraud scoring tools.

These use algorithms to assess transaction risk. They analyze factors like purchase history, location, and device information. These tools assign a risk score to each transaction.

High-risk transactions may require additional verification or be declined.

Then, aim for customer authentication.

Verify that the actual account holder is using the account by methods like:

• 3D Secure: Adds an extra verification step for online purchases.
• Biometrics: Uses fingerprints or facial recognition for secure logins.
• Two-factor authentication: Requires a second form of verification, like time-based one-time passwords.

Encouraging payment methods like Google Pay or Apple Pay also work wonders.

Both tokenize card information and require biometric verification to pay.

For instance, a company claims they had a 25% reduction in chargeback rates when switching to Apple Pay [4].

Note that mid-sized companies will typically spend 11% of their annual revenue on fraud prevention [5].

Yes, that’s ridiculous. However. That’s the world we live in.

Preventing unauthorized transactions will help you in the long run.

2. Merchant Error Prevention

To prevent merchant error chargebacks, focus on accuracy and clear communication.

Start by ensuring all product descriptions are clear and accurate.

This prevents misunderstandings that lead to disputes.

Double-check billing amounts before processing transactions. To avoid errors like overcharging or duplicate charges.

Always confirm the customer's shipping details to prevent delivery issues.

Provide clear return and refund policies. Make them easily accessible to customers.

Also:

Send order confirmations and tracking information promptly.

Opt for shipping insurance to ensure you have evidence the order reached the customer’s home. Especially on higher-valued goods.

If an issue arises, address it quickly with the customer to resolve it before they file a chargeback.

Regularly train your staff on these practices to minimize errors.

Most of it comes down to transparency and not screwing up your buyer’s orders.

If you’re a customer reading this guide, you’ll love this next part.

How to File a Debit Card Chargeback (As a Customer)

To file a debit card chargeback, contact your bank immediately. Provide details about the unauthorized transaction, including the date, amount, and merchant.

Note that many banks have online platforms where you’ll submit and manage disputes. This will vary by institution.

Your bank will start an investigation. If the bank finds the charge unauthorized, they'll credit your account and pursue the merchant for reimbursement.

Here are “tips” to consider before filing a chargeback:

• Most banks have deadlines for filing chargebacks.
• Gather evidence, such as receipts or chat logs with the merchant, to strengthen your case.
• Card networks usually limit the number of disputes you can file for each order.
• If you have new evidence after a decision, appeal the decision and submit it.

There’s not much else you can do as a customer. Wait for your bank’s (or card brand’s) decision.

There’s nothing much else to cover here. Otherwise, I’d be repeating what’s in our other guides.

Summary: Contact your bank or use an online chargeback filing form to start a chargeback.

Conclusion

Debit card chargebacks are almost the same as their credit card counterparts. With the exception of the cardholder having more liability and less time limit freedoms.

Regardless:

You need to prevent chargebacks in general. They all inflict a lot of damage. One way that you can prevent disputes is by using chargeback alerts.

We offer such alerts and can help. Learn more now.

Sources

• [1] Growing chargeback problem. Enigma. 4.23/2024.
• [2] Purchase disputes. Visa UK.
• [3] Year in chargebacks. Kount. 
• [4] Lenders fight against chargebacks. PayNearMe. 3/25/2021.
• [5] Cost of fraud. Snappt. 5/20/2024.