Discover Chargeback Reason Codes: The Ultimate Merchant's Guide

As a former e-commerce store owner, I’ve dealt with some chargebacks that result from transactions that used Discover. That taught me a lot about Discover’s chargeback reason codes. I want to pass the knowledge to you.

I’ll explain the different reason codes in each category, what causes them, ways to prevent them, and evidence that you’ll need to provide for every dispute that arises from them.

Let’s dive in.

Key Takeaways

• All of these reason codes require customers to file chargebacks within 120 days after the transaction.
• None of these reason codes have time limits for acquirers and merchants.
• There are 24 reason codes that explain the reasons for disputes.
• Almost all reason codes will require you to submit proof of the transaction.

Service Dispute Codes

1. 05: Good Faith Investigation Chargeback

Description: A cardholder disputes a transaction after the standard timeframe for filing a chargeback has expired. Discover allows these "good faith" investigations to address situations where a customer may have discovered fraud or unauthorized activity on their account after the usual dispute window.

Causes: 

• Fraudulent Transactions: The cardholder discovers unauthorized charges on their statement, often due to identity theft or account compromise.
• Friendly Fraud: The cardholder genuinely doesn't remember the transaction or believes they were charged in error, even though they authorized the purchase.
• Merchant Error: A processing error on the merchant's side resulted in an incorrect or duplicate charge.

Prevention: 

• Maintain clear and detailed transaction records.
• Implement strong fraud prevention measures, such as address verification and CVV checks.
• Communicate with customers about their purchases.

Evidence Needed: 

• Original transaction receipt or invoice
• Proof of authorization (e.g., signed credit card slip, authorization code)
• Delivery confirmation or tracking information
• Communication records with the cardholder
• Any documentation supporting the validity of the transaction

2. AA: Does Not Recognize

Description: A customer sees a transaction on their statement that they don’t recognize or remember authorizing. 

Causes: 

• Friendly Fraud
• True Fraud: Stolen card information or account compromise.
• Merchant Error: Inaccurate or unclear transaction descriptor.

Prevention: 

• Use your business name or website URL as the descriptor to make it easily recognizable.
• Detailed order confirmations
• Communicate with customers about their purchases and respond to inquiries promptly.
• Implement Address Verification Service (AVS) and Card Verification Value (CVV) checks.

Evidence Needed: 

• Transaction Receipt or Invoice: Proof of the legitimate purchase with itemized details.
• Proof of Authorization: Signed credit card slip, online authorization code, or any documentation showing the cardholder's consent.
• IP Address and Location Data: If applicable, provide evidence linking the transaction to the cardholder's location or device.
• Communication Records: Any email or chat logs with the cardholder related to the purchase.

3. AP: Recurring Payments

Description: The customer may claim they canceled the service, were unaware of the recurring billing, or believe the charges are unauthorized.

Causes: 

• Cardholder believes they canceled the service but continues to be charged.
• Shopper wasn’t informed about the recurring nature of the charges.
• Fraud.
• Incorrect amounts or billing dates.

Prevention:

• Disclose the terms of the recurring billing, including the amount, frequency, and cancellation policy.
• Make the cancellation process simple and accessible for customers.
• Send reminder emails before each billing cycle, informing them of the upcoming charge and how to cancel.
• Ensure that billing descriptors on statements are clear and easily recognizable.
• Implement security measures to prevent unauthorized signups and transactions.

Evidence Needed: 

• Signed agreement, online acceptance of terms and conditions, or any documentation showing the cardholder agreed to the recurring billing.
• Provide a copy of your cancellation policy, highlighting any relevant terms or deadlines.
• Detailed transaction history showing all recurring charges and any communication related to cancellation attempts.

If the cardholder claims they canceled but didn't follow your cancellation policy, use this as evidence. Moreover, consider offering partial refunds or credits in cases where the customer may have genuinely misunderstood the terms.

4. DP: Duplicate Processing

Description: You charged the shopper multiple times.

Causes: 

• Accidental duplicate transaction submission.
• A glitch in the payment processing system.
• The cardholder may have accidentally initiated the same transaction multiple times.

Prevention: 

• Implement a system to track and manage transactions.
• If a duplicate charge occurs, inform the customer immediately and quickly issue a refund.
• Train staff on proper transaction processing procedures to minimize human error.

Evidence Needed: 

• Provide transaction records showing the original transaction and any following duplicates.
• If a refund was issued, provide proof of the reversal.
• Communication records.

5. AW: Altered Amount

Description: Transaction amount submitted for authorization doesn't match the final amount charged to the cardholder.

Causes:

• Incorrectly entering the transaction amount during processing, adding extra fees after authorization, or modifying the original amount without consent.
• A glitch in the payment system causes an incorrect amount to be charged.
• A fraudster could alter the transaction amount after authorization.

Prevention: 

• Verify the transaction amount before processing and ensure it matches the authorized amount.
• Communicate any additional fees or charges to the customer before finalizing the transaction.
• If the final amount differs from the initial authorization, obtain a new authorization from the cardholder.
• Update and maintain your payment processing systems to minimize the risk of glitches or errors.

Evidence Needed: 

• Proof of the initial authorized amount, such as a transaction receipt or online authorization record.
• Documentation showing the final amount charged to the cardholder.

6. CD: Credit Posted as Card Sale

Description: Instead of receiving a refund, the customer sees a new charge on their account.

Causes: 

• Processing error.
• A glitch in the payment system causes a credit to become a charge.

Prevention: 

• Verify the transaction type (sale, credit, or refund) before processing to ensure accuracy.
• When issuing refunds, use the appropriate processing codes to ensure they are correctly reflected on the cardholder's statement.
• Review transaction records to identify and correct any errors.

Evidence Needed: 

• Transaction records.
• Documentation confirming that you issued a refund or credit was issued.
• Communication records.

7. NF: Non-Receipt of Cash from ATM

Description: The cardholder claims they did not receive the full amount of cash they requested during a withdrawal, even though their account was debited for the full amount.

Cause: The ATM machine experienced an error and failed to dispense the correct amount of cash.

Prevention: 

• Regular ATM maintenance.
• Provide clear instructions on ATM screens to guide users through the withdrawal process and remind them to collect dispensed cash.
• Implement security measures to detect and prevent fraudulent activity.
• Monitor ATM transactions for discrepancies or unusual activity.

Evidence Needed: 

• ATM logs
• Surveillance footage
• Maintenance records

8. PM: Paid By Other Means

Description: Customer claims they paid for a transaction using a different method, meaning the Discover charge is a duplicate.

Causes: 

• Duplicate payments.
• The cardholder may believe they paid using a different method due to confusion or a lack of clarity during the transaction.
• The seller accidentally processed the payment twice, once with the Discover card and once with another method provided by the customer.

Prevention: 

• Double-check payments.
• Train staff to handle multiple payment methods correctly and to avoid accidentally processing duplicate payments.

Evidence Needed: 

• Transaction records.
• Communication records.
• If available, provide proof of the alternate payment method used by the customer, such as a cash receipt or a transaction record for another card.

9. RG: Non-Receipt of Goods or Services

Description:  Shopper didn’t receive the goods or services they purchased, despite being charged for them

Causes: 

• Seller failed to deliver the purchased goods within the agreed-upon timeframe or at all.
• Merchant did not provide the promised service.
• Goods shipped to an incorrect address.
• Friendly fraud.

Prevention: 

• Use a shipping method that provides tracking and delivery confirmation.
• Inform shoppers about the status of their orders and estimated delivery times.
• Have clear agreements outlining the scope of work and expected delivery timelines.

Evidence Needed: 

• Proof of Delivery: Tracking information, delivery confirmation receipts, or signed delivery slips.
• Communication Records: Emails, order confirmations, or any other logs with the cardholder regarding the order.
• Service contracts/agreements.

10. RM: Quality of Goods or Services

Description: Customer is dissatisfied with the quality of goods or services purchased 

Causes: 

• Product arrived broken, malfunctioning, or not working as expected.
• The merchandise received differs from the description or advertisement.
• The service provided wasn’t up to par, incomplete, or not delivered as promised.
• Friendly fraud.

Prevention:

• Ensure product descriptions and images are clear, accurate, and represent the items.
• Quality control.

Evidence Needed: 

• Product description/photos.
• Proof of delivery.
• Communication records.
• Return and refund policy.

11. RN2: Credit Not Processed

Description: Consumer was promised a refund or credit by the merchant, but it was not processed or received within a reasonable timeframe.

Causes: 

• Seller failed to process the promised refund or credit, or processed it incorrectly.
• The refund or credit was processed, but it is taking longer than expected to reflect on the cardholder's statement.
• There was a misunderstanding between the merchant and cardholder regarding the refund or credit.

Prevention: 

• Process refunds and credits quickly.

Evidence Needed: 

• Refund/credit confirmation.
• Communication records.
• Provide a copy of your refund policy to prove that you followed your stated procedures.

12. IC: Illegible Sales Data

Description: Sales receipt isn’t legible.

Causes:

• The sales receipt provided is too faded, damaged, or poorly printed to be legible.
• The electronic transaction record submitted by the merchant is missing crucial information like the authorization code, transaction amount, or cardholder signature.

Prevention: 

• Ensure that your point-of-sale system produces clear, legible receipts with all transaction details.

Evidence Needed: 

• Provide a clear and legible copy of the original sales receipt with all relevant transaction details.
• If the transaction was processed electronically, provide a detailed transaction record with all necessary information, including authorization code, transaction amount, and cardholder signature (if applicable).

Codes for Fraudulent Transactions

1. UA01: Card Present Transaction

Description: Transaction that was processed in a card-present environment (e.g., at a physical store or using a POS terminal) due to suspected fraud.

Causes:

• Lost or Stolen Card:
• Counterfeit Card
• Card information was stolen through skimming devices installed on card readers or ATMs.

Prevention:

• Request identification from customers when processing card-present transactions.
• Inspect the card for any signs of tampering or counterfeiting, such as altered holograms or mismatched numbers.
• If your POS terminal supports EMV chip technology, use it for all card-present transactions.
• Watch out for any unusual patterns or suspicious behavior during transactions.

Evidence Required: 

• A copy of the original transaction receipt signed by the cardholder.
• If available, provide any documentation or records used to verify the cardholder's identity during the transaction.
• Surveillance footage.
• Sales records.

2. UA02: Card Not Present Transaction

Description: Transaction that was processed without the physical card being present (e.g., online or over the phone) due to suspected fraud.

Causes:

• Stolen card information.
• A fraudster gained access to the cardholder's online account and made unauthorized transactions.
• Friendly fraud.

Prevention:

• Use address verification (AVS), card verification value (CVV) checks, and fraud detection tools.
• Protect customer data by using encryption and secure servers, and following best practices for data security.
• Inform customers about safe online shopping practices and how to identify potential scams or phishing attempts.

Evidence Required:

• Transaction details.
• If applicable, provide proof of address verification (AVS) and card verification value (CVV) checks.
• If you use fraud detection tools, provide any reports or analysis indicating the transaction was not flagged as high risk.
• Communication records.

3. UA05: Chip Card Counterfeit Transaction

Description: Card-present transaction made with a chip card, claiming it was unauthorized due to a counterfeit card

Causes:

• Criminals create a fake chip card by cloning the data from a legitimate card's chip and using it for unauthorized transactions.
• If the merchant's terminal cannot read the chip, the transaction is processed by swiping the magnetic stripe, which is more vulnerable to counterfeiting.

Prevention:

• Ensure your point-of-sale (POS) terminal is EMV chip compliant and capable of reading chip data.
• Attempt to process chip transactions first and only fallback to swiping the magnetic stripe if the chip reader fails.
• Train employees to recognize counterfeit cards.
• Implement additional security measures like address verification (AVS) and card verification value (CVV) checks.

Evidence Required: 

• Transaction receipt.
• If possible, provide evidence that the transaction was processed using the chip reader.
• Provide any relevant logs from your POS terminal that can help verify the transaction details and the method used for processing.

4. UA06: Chip and PIN Transaction

Description: Transaction made with a hybrid chip-and-stripe card at a terminal that either only reads the magnetic stripe or is chip-capable but lacks a PIN pad

Causes:

• The transaction was processed by swiping the magnetic stripe instead of using the chip.
• The terminal lacked a PIN pad.
• Counterfeit card.

Prevention:

• Upgrade terminals.
• Attempt to process chip transactions first, even with hybrid cards. Fallback to swiping the magnetic stripe if the chip reader fails.
• If your terminal is chip-capable, always require PIN entry for added security.

Evidence Required:

• Transaction receipt.
• Provide documentation or evidence demonstrating the terminal's capabilities (whether it's stripe-only or chip-capable with/without a PIN pad).
• Terminal logs.

5. UA10: Request Transaction Receipt (Swiped Card Transactions)

Description: Discover requests additional information about a card-present transaction processed by swiping the card's magnetic stripe.

Causes:

• Signature on the transaction receipt doesn't match the signature on the back of the card.
• Transaction receipt is unreadable or missing important information.
• Seller failed to obtain authorization for the transaction.

Evidence Required: 

• Legible transaction receipt.
• Provide documentation showing that authorization was obtained for the transaction.
• If available, provide any documentation or records used to verify the cardholder's identity during the transaction.

6. UA11: Cardholder Claims Fraud (Swiped Transaction, No Signature)

Description: Cardholder disputes a swiped transaction claiming it was fraudulent

Causes:

• Fraudulent transaction.
• The merchant failed to obtain the cardholder's signature on the transaction receipt, due to oversight or a malfunctioning signature capture device.

Prevention:

• Make it a strict policy to obtain the cardholder's signature for all swiped transactions.
• Ensure the signature on the receipt matches the one on the back of the card.
• Train team members on the importance of obtaining signatures and how to handle signature verification.
• Use EMV chip devices.

Evidence Required: 

• Transaction receipt.
• If you have any other evidence that the transaction was authorized (e.g., surveillance footage, witness testimony), provide it.
• Communication records.

Processing Errors & Authorization

1. AT: Authorization Noncompliance

Description: Transaction that was processed without obtaining a positive authorization response from the issuer.

Causes: 

• The merchant processed the transaction without receiving approval from the issuer.
• Expired Card
• System Error

Prevention: 

• Always obtain a positive authorization response before processing any transaction.
• Check the card's expiration date.
• Adhere to Discover's authorization rules and procedures to avoid errors and potential chargebacks.
• Ensure your payment processing systems are up-to-date.

Evidence Needed: 

• Authorization record.
• Transaction receipt.
• If applicable, provide any documentation or records used to verify the card's validity during the transaction.

2. IN: Invalid Card Number

Description: Card number used isn’t assigned to a valid cardholder.

Causes: Customer error

Evidence Needed: 

• Transaction records.
• Communication records.

3. LP: Late Presentment

Description: Merchant submits a transaction for processing after the allowed time frame. 

Causes: 

• Merchant experiences technical issues or delays.
• Errors in batch processing.
• Seller forgets or neglects to process the transaction within the allowed time.

Evidence Needed: 

• Transaction records.
• If the transaction was processed within the allowed timeframe, provide documentation to support this claim.
• Explanation of delay.

4. DA: Declined Authorization

Description: Merchant processed transaction despite Discover declining authorization request.

5. EX: Expired Card

Description: Card expired at the time of transaction..

Prevention: 

• Verify the card's expiration date before processing any transaction.
• Train employees on the importance of checking card expiration dates and how to handle expired cards.
• Ensure your payment processing systems are up-to-date and functioning properly to detect expired cards.

Evidence Needed: 

• Transaction receipt.
• Proof of authorization (if applicable).

6. NA: No Authorization

Description: Merchant processes a transaction without obtaining proper authorization from Discover.

Wrapping Up

Most of these codes require training staff to recognize fraud, expired cards or other issues. The other major contributor to these reason codes are out-of-date systems. Then there’s not delivering refunds to customers quickly.

We can help with that last part because we partner with alert providers like CDRN to notify you when a customer disputes a transaction. And if you deal with the dispute then, it likely won’t escalate to a costly chargeback.