75+ essential terms defined in plain language. The reference guide every merchant needs to navigate chargebacks, fraud prevention, and payment disputes.
75+ terms • Updated March 2026
The bank or financial institution that processes credit and debit card transactions on behalf of a merchant. The acquirer receives transaction data, routes it through the card network, and deposits funds into the merchant's account. In chargeback disputes, the acquirer acts as the merchant's representative in communicating with the issuing bank.
A unique 23-digit identifier assigned to every Visa transaction by the acquirer. The ARN traces a transaction through the entire payment chain from merchant to cardholder. It is essential for tracking refunds, retrievals, and chargebacks across systems, and is often required when submitting representment evidence.
A fraud prevention tool that compares the billing address provided by the cardholder at checkout against the address on file with the issuing bank. AVS returns a match code indicating whether the street address and/or ZIP code match. A positive AVS result strengthens representment evidence in fraud-related disputes.
The final stage of the chargeback dispute process, where the card network (Visa, Mastercard, etc.) makes a binding decision after the merchant and issuer cannot reach a resolution through representment or pre-arbitration. Arbitration carries significant fees ($250–$500+) for the losing party, making it a high-stakes decision for merchants.
The process of verifying that a cardholder's account has sufficient funds and the transaction is approved by the issuing bank. An authorization hold temporarily reserves the transaction amount. A valid authorization is a key piece of evidence in chargeback disputes, proving the transaction was approved at the time of purchase.
A temporary hold placed on a cardholder's funds when a transaction is authorized but not yet settled. Authorization holds are common in hotels, car rentals, and gas stations where the final amount may differ from the initial authorization. Disputes can arise when holds are not released promptly after settlement.
A type of fraud where criminals systematically test thousands of card numbers generated from a known Bank Identification Number (BIN) to find valid card details. BIN attacks generate high volumes of small-value transactions and can quickly spike a merchant's chargeback ratio when cardholders discover unauthorized charges.
The text that appears on a cardholder's bank or credit card statement identifying a charge. Unclear or unrecognizable billing descriptors are one of the leading causes of friendly fraud, as cardholders dispute transactions they do not recognize. Best practice is to use your recognizable brand name, customer service phone number, and a brief description.
The first six to eight digits of a credit or debit card number that identify the issuing bank, card brand, and card type (credit, debit, prepaid). BIN data helps merchants assess transaction risk, as certain BIN ranges are associated with higher fraud rates or specific geographic regions.
A transaction where the physical card is not presented to the merchant, such as online, phone, or mail orders. CNP transactions carry higher fraud risk because the merchant cannot verify the cardholder's physical possession of the card. CNP fraud accounts for over 80% of all card fraud globally.
Read more: Reduce E-commerce Chargebacks →A transaction where the physical card is presented at the point of sale and authenticated via chip (EMV), contactless (NFC), or magnetic stripe. Card-present transactions carry lower fraud risk due to physical card verification and typically have lower interchange rates than CNP transactions.
The individual whose name appears on a credit or debit card and who is authorized by the issuing bank to use the card for transactions. In chargeback disputes, the cardholder is the party who initiates the dispute through their issuing bank, regardless of whether the dispute is legitimate.
A forced reversal of a credit or debit card transaction, initiated by the cardholder's issuing bank. Chargebacks were designed to protect consumers from unauthorized transactions, but are frequently misused for buyer's remorse or friendly fraud. Each chargeback costs the merchant the transaction amount plus fees, and counts toward their chargeback ratio.
Read more: What Is a Chargeback? →A non-refundable fee charged to the merchant by their acquirer or payment processor for each chargeback received, regardless of the dispute outcome. Chargeback fees typically range from $15 to $100 per dispute, and are separate from the transaction amount being disputed. High-risk merchants may face fees at the upper end.
Read more: The True Cost of Chargebacks →The percentage of total transactions that result in chargebacks during a given period (usually monthly). Calculated by dividing the number of chargebacks by total transactions. Visa and Mastercard monitor this ratio and enroll merchants in penalty programs when thresholds are exceeded (typically 0.9%–1.0% for Visa, 1.0%–1.5% for Mastercard).
Read more: How to Calculate Your Ratio →The maximum chargeback ratio a merchant can maintain before being placed into a card network's monitoring or penalty program. Each network sets its own thresholds: Visa's VDMP triggers at 0.9% (early warning) and 1.0% (standard), while Mastercard's ECP triggers at 1.0% (early warning) and 1.5% (excessive).
Read more: How to Calculate Your Ratio →Documentation submitted by a merchant during representment to prove a disputed transaction was legitimate. Compelling evidence varies by reason code and may include delivery confirmation, customer communication logs, IP addresses, device fingerprints, AVS/CVV verification records, and proof of prior undisputed transactions. Visa's Compelling Evidence 3.0 framework sets specific criteria for fraud disputes.
Read more: Evidence Guide →A Mastercard service that provides enriched transaction details to issuing banks and cardholders during the dispute process. Consumer Clarity shares order details, merchant contact information, and transaction context to help cardholders recognize charges before filing a chargeback. It works as a pre-dispute deflection tool, reducing unnecessary chargebacks.
The unauthorized use of a credit card or card information to make purchases or withdraw funds. Credit card fraud can be committed through stolen physical cards, compromised card numbers, account takeover, or synthetic identity fraud. It is distinct from friendly fraud, where the actual cardholder makes a legitimate purchase and then disputes it.
Card Verification Value (CVV) or Card Verification Code (CVC) is a 3- or 4-digit security code printed on a credit or debit card, used to verify the cardholder has physical possession of the card during CNP transactions. A CVV match is a valuable piece of evidence in chargeback representment, proving the person placing the order had access to the physical card.
The outcome when a merchant successfully disputes a chargeback through representment and the issuing bank reverses the chargeback, returning the funds to the merchant. A chargeback reversal does not always remove the chargeback from the merchant's ratio calculations, depending on the network and timing.
A chargeback processed through a debit card network (such as STAR, NYCE, or Pulse) rather than through Visa or Mastercard. Debit network chargebacks follow different rules, timelines, and reason codes than traditional card network disputes. Merchants often have fewer representment rights and shorter response windows for debit network disputes.
The broad term for any cardholder-initiated challenge to a transaction. A dispute begins when a cardholder contacts their issuing bank to question a charge. Not all disputes become chargebacks; some are resolved through retrieval requests, merchant-issued refunds, or pre-dispute tools like Ethoca Alerts and Order Insight before a formal chargeback is filed.
Read more: The Chargeback Process →The complete timeline of a payment dispute from initiation to final resolution. The lifecycle typically includes: cardholder complaint, issuer investigation, provisional credit to cardholder, chargeback filing, merchant notification, representment window, issuer review, and potential escalation to pre-arbitration or arbitration. The full cycle can span 60–120+ days.
Read more: The Chargeback Process →When a cardholder is billed twice for the same transaction, either due to a processing error, duplicate authorization, or system glitch. Double charges are a common and legitimate reason for chargeback disputes. Merchants should proactively monitor for duplicate transactions and issue prompt refunds when identified to prevent disputes.
A request from the issuing bank to the merchant's acquirer for a copy of the original transaction receipt or sales draft. Draft retrievals (also called retrieval requests) are often a precursor to a chargeback and give the merchant an opportunity to resolve the dispute before it escalates. Responding promptly to retrieval requests can prevent formal chargebacks.
Fraudulent transactions conducted through online shopping platforms, including card-not-present fraud, account takeover, synthetic identity fraud, and refund abuse. E-commerce merchants face disproportionately high fraud rates compared to brick-and-mortar retailers, with an average chargeback rate of 0.6% across the industry.
A global standard for chip-based credit and debit card processing, named after its creators (Europay, Mastercard, Visa). EMV chip cards generate a unique cryptographic code for each transaction, making counterfeit fraud virtually impossible for card-present transactions. The EMV liability shift in 2015 made merchants liable for counterfeit fraud if they don't support chip transactions.
A Mastercard-owned service that notifies merchants when a cardholder begins the dispute process, before a formal chargeback is filed. Merchants typically have 24–48 hours to issue a refund and prevent the chargeback from being recorded. Ethoca Alerts carry a per-alert fee but are significantly cheaper than the combined cost of a chargeback fee plus lost dispute.
Mastercard's monitoring program for merchants with elevated chargeback rates. The ECP has two tiers: an early warning level at 1.0% chargeback ratio (or 100+ chargebacks/month) and an excessive level at 1.5% (or 300+ chargebacks/month). Merchants enrolled in ECP face escalating fines, mandatory remediation plans, and risk of account termination.
Read more: How to Calculate Your Ratio →The initial chargeback filed against a transaction, as opposed to a second chargeback (pre-arbitration). The first chargeback triggers the representment window during which the merchant can submit evidence to contest the dispute. Most networks allow 20–45 days for the merchant to respond to a first chargeback.
The deliberate deception or misrepresentation used to gain unauthorized financial benefit. In the payments context, fraud encompasses unauthorized card use, identity theft, account takeover, and friendly fraud. Understanding the distinction between true fraud and friendly fraud is critical because they require fundamentally different prevention and response strategies.
The automated analysis of transactions in real-time to identify and block potentially fraudulent orders before they are processed. Fraud screening tools evaluate signals including IP geolocation, device fingerprinting, velocity checks, BIN analysis, and behavioral patterns. Effective screening balances fraud prevention against false positive rates that reject legitimate customers.
When a legitimate cardholder makes a valid purchase and then disputes the charge through their bank instead of requesting a refund from the merchant. Also called first-party fraud or chargeback fraud. Friendly fraud accounts for an estimated 60–80% of all chargebacks and has increased 43% over the past three years. It is often the most winnable dispute type with proper evidence.
Read more: Friendly Fraud Explained →A technology service that transmits transaction data between the merchant's website or point-of-sale system and the payment processor or acquiring bank. The gateway encrypts sensitive card data, routes authorization requests, and returns approval or decline responses. Popular gateways include Stripe, Braintree, Authorize.net, and Adyen.
A fee paid by the merchant's acquiring bank to the cardholder's issuing bank each time a card transaction is processed. Interchange fees are set by the card networks and vary based on card type, transaction method (CP vs. CNP), merchant category, and transaction size. They are a significant component of overall payment processing costs.
The financial institution that issues credit or debit cards to consumers on behalf of a card network. In the chargeback process, the issuer receives the cardholder's dispute, investigates the claim, issues provisional credit, and files the chargeback with the acquirer. Major issuers include Chase, Bank of America, Citibank, and Capital One.
A chargeback reason code category used when a cardholder claims they never received the goods or services they purchased. INR disputes are among the most common chargeback types and typically require delivery confirmation, carrier tracking data, and proof of delivery to the correct address to win during representment.
Read more: Visa 13.1: Item Not Received →A chargeback reason code category used when a cardholder claims the product or service received was materially different from what was described or advertised. Winning these disputes requires detailed product descriptions, photographs, terms of sale, and evidence that the delivered item matched the listing. Clear product pages and return policies reduce these disputes.
A transfer of financial responsibility for fraudulent transactions from one party to another, based on authentication and security protocols. The most common liability shift occurs with 3D Secure: when a transaction is authenticated via 3DS, fraud liability shifts from the merchant to the issuing bank. EMV chip transactions similarly shift counterfeit fraud liability away from chip-enabled merchants.
The Member Alert to Control High-Risk Merchants list (formerly the Terminated Merchant File) is a database maintained by Mastercard that records merchants whose accounts have been terminated for cause. Being placed on the MATCH list effectively blacklists a merchant from obtaining new processing accounts for five years. Common reasons include excessive chargebacks, fraud, and PCI non-compliance.
A specialized bank account that enables a business to accept credit and debit card payments. The merchant account holds funds from card transactions before they are transferred to the merchant's regular business account. Merchant accounts are provided by acquiring banks or payment service providers and come with processing agreements that include chargeback policies.
A four-digit code assigned by card networks to classify a merchant by the type of goods or services they sell. MCCs affect interchange rates, fraud screening rules, and chargeback monitoring thresholds. Certain MCCs (such as those for gambling, adult content, or nutraceuticals) are classified as high-risk and face stricter chargeback scrutiny.
The entity that is authorized to process a transaction and appears as the seller on the cardholder's statement. The merchant of record bears responsibility for chargebacks, refunds, and regulatory compliance. In marketplace models, the platform (not the individual seller) is often the merchant of record, which centralizes chargeback liability.
A card network program that identifies and penalizes merchants with excessive chargeback rates. Visa's VDMP and Mastercard's ECP are the two major monitoring programs. Enrollment triggers escalating monthly fines, mandatory remediation plans, and potential account termination. Merchants should aim to keep their ratio below 0.5% to stay well clear of monitoring thresholds.
Read more: How to Calculate Your Ratio →An organization that operates the infrastructure connecting issuing banks and acquiring banks to facilitate card transactions. The four major card networks are Visa, Mastercard, American Express, and Discover. Each network maintains its own rules, reason codes, and dispute resolution processes. The network serves as the final arbiter in chargeback arbitration cases.
A Visa service (formerly Visa Merchant Purchase Inquiry or VMPI) that enables merchants to share detailed order information directly with issuers when a cardholder inquires about a transaction. By providing purchase details, shipping information, and return policy data in real-time, Order Insight helps cardholders recognize legitimate charges and reduces unnecessary disputes before they become chargebacks.
A company that handles the technical routing and settlement of card transactions between merchants, acquiring banks, card networks, and issuing banks. Payment processors manage authorization requests, batch settlements, and chargeback notifications. Major processors include Fiserv (First Data), Worldpay, TSYS, and Global Payments.
The Payment Card Industry Data Security Standard is a set of security requirements designed to protect cardholder data. All merchants that accept card payments must comply with PCI DSS. Non-compliance can result in fines, increased processing fees, and liability for data breaches. PCI DSS compliance is also a factor in chargeback risk assessment by acquirers.
An intermediate dispute stage between the first chargeback and formal arbitration. If a merchant wins representment but the issuer disagrees, the issuer can file a pre-arbitration case with additional evidence or arguments. The merchant then decides whether to accept the chargeback, submit additional evidence, or escalate to binding network arbitration.
A temporary credit issued by the issuing bank to the cardholder's account when a chargeback is filed, before the dispute is fully resolved. Provisional credit gives the cardholder immediate access to the disputed funds. If the merchant wins representment, the provisional credit is reversed and the funds are returned to the merchant.
A Visa program that allows merchants to set automated rules for accepting or resolving chargebacks before they are formally processed. When a dispute matches the merchant's pre-defined criteria (such as transaction amount thresholds), it is automatically resolved with a refund. RDR disputes do not count against the merchant's chargeback ratio, making it a valuable ratio management tool.
An alphanumeric code assigned by the card network to categorize the specific reason a chargeback was filed. Each network maintains its own set of reason codes (e.g., Visa 10.4 for CNP fraud, Mastercard 4837 for card-not-present fraud). The reason code determines what evidence the merchant needs to submit and what response framework to use during representment.
Read more: Visa 13.1 Reason Code →A voluntary return of funds from the merchant to the cardholder, typically processed through the original payment method. Refunds are distinct from chargebacks in that they are initiated by the merchant rather than the issuing bank. Proactive refund policies can significantly reduce chargeback rates, as cardholders are less likely to dispute when the merchant resolves issues directly.
Read more: Chargeback vs. Refund →The formal process by which a merchant contests a chargeback by submitting evidence and a rebuttal letter to their acquiring bank, which forwards it to the issuing bank for review. Representment is the merchant's primary opportunity to reverse a chargeback. Success depends on submitting the correct evidence, using network-specific language, and responding within the deadline (typically 20–45 days).
Read more: How to Write a Rebuttal Letter →A request from the issuing bank for information about a transaction before a formal chargeback is filed. Retrieval requests give the merchant an early warning that a dispute may be coming and an opportunity to resolve the issue proactively. Failing to respond to a retrieval request within the deadline typically results in an automatic chargeback.
A system used by merchants to manage and track product returns. An RMA number is assigned to each return request, allowing the merchant to verify that goods are returned before processing a refund. Having a documented RMA process strengthens the merchant's position in chargeback disputes related to returns, as it demonstrates a clear and accessible return policy.
A chargeback filed after the merchant has already won the initial representment, effectively re-opening the dispute. Second chargebacks (also called pre-arbitration chargebacks) occur when the issuer believes the merchant's evidence was insufficient or when new information surfaces. The merchant can accept the loss or escalate to network arbitration at this stage.
A regulatory requirement under the EU's Revised Payment Services Directive (PSD2) that mandates two-factor authentication for electronic payments in the European Economic Area. SCA requires at least two of three authentication factors: something the customer knows (password), something they have (phone), or something they are (biometric). 3D Secure 2 is the primary method for achieving SCA compliance in CNP transactions.
A recurring payment model where customers are billed automatically at regular intervals for ongoing access to a product or service. Subscription billing generates a disproportionate share of chargebacks due to forgotten subscriptions, difficulty canceling, and customers disputing renewal charges they did not expect. Clear cancellation policies and pre-billing reminders are essential for reducing subscription-related disputes.
Read more: SaaS & Subscription Chargebacks →A fraud reporting mechanism used by Visa, where issuing banks file a TC40 claim to flag transactions suspected of being fraudulent. TC40 reports are informational and do not directly result in chargebacks, but they signal that fraud is associated with a merchant's account. A high volume of TC40 reports can trigger network monitoring and increased acquirer scrutiny.
A security technique that replaces sensitive card data (such as a card number) with a unique, non-reversible identifier called a token. Tokens can be used for transaction processing without exposing actual card data, reducing the risk of data breaches and simplifying PCI DSS compliance. Network tokenization also improves authorization rates for recurring transactions by automatically updating expired card details.
A unique identifier assigned to each payment transaction by the payment processor or gateway. The transaction ID is used to track, reference, and locate specific transactions in merchant and processor systems. It is a fundamental piece of evidence in chargeback disputes, as it links the disputed charge to its full transaction record.
Unauthorized use of a credit or debit card by someone other than the legitimate cardholder, such as a stolen card, compromised account, or identity theft. True fraud disputes are the hardest for merchants to win because the cardholder genuinely did not authorize the transaction. 3D Secure authentication is the primary defense, as it shifts liability to the issuer for authenticated transactions.
Read more: True Fraud vs. Friendly Fraud →An authentication protocol for card-not-present transactions that adds an extra verification step between the cardholder and their issuing bank. Branded as "Verified by Visa," "Mastercard Identity Check," and "American Express SafeKey." Successfully authenticated 3DS transactions shift fraud chargeback liability from the merchant to the issuing bank, making it one of the most effective fraud prevention tools available.
Read more: Reduce E-commerce Chargebacks →The second-generation 3D Secure protocol that provides frictionless authentication for the majority of transactions. Unlike the original 3DS, which required all cardholders to complete a challenge (such as entering a password), 3DS2 uses risk-based authentication with over 100 data points to approve low-risk transactions silently. Approximately 80% of 3DS2 transactions authenticate without any cardholder interaction, maintaining conversion rates while providing liability protection.
Read more: Reduce E-commerce Chargebacks →Visa's branded implementation of the 3D Secure authentication protocol. When a cardholder completes a Verified by Visa authentication during checkout, the transaction receives liability protection against fraud-related chargebacks. The service is now powered by 3DS2 technology, enabling frictionless authentication for most transactions while maintaining strong fraud prevention.
Visa's program for monitoring and penalizing merchants with excessive chargeback rates. VDMP has two tiers: Early Warning at 0.9% chargeback ratio (with 75+ monthly chargebacks) and Standard at 1.0% (with 100+ monthly chargebacks). Merchants in the Standard tier face monthly fines starting at $50 per chargeback, escalating to $25,000+ in review fees, with potential account termination after 12 months.
Read more: How to Calculate Your Ratio →A fraud screening rule that monitors the frequency of transactions from a single card, IP address, device, or customer account within a defined time period. Velocity checks detect patterns consistent with fraud, such as multiple rapid purchases with the same card number or a burst of small transactions testing card validity. Configuring appropriate velocity thresholds is essential for blocking BIN attacks and automated fraud.
The percentage of chargebacks that a merchant successfully reverses through representment. The industry average win rate is approximately 20–30%, but merchants using targeted, reason-code-specific response frameworks can achieve 60–70%+ for certain dispute types. Win rate is a key performance metric for evaluating chargeback management effectiveness.
Read more: Evidence Guide →A federal crime involving the use of electronic communications (phone, email, internet) to carry out a fraudulent scheme. While distinct from credit card fraud, wire fraud charges can apply to sophisticated chargeback fraud schemes, particularly organized friendly fraud operations. Wire fraud carries penalties of up to 20 years in federal prison.
Now that you know the terminology, learn how to put it into action. Explore our FAQ for common chargeback questions, or dive into our reason code guides for step-by-step response frameworks.