Chargebacks: Overview

A chargeback happens when a guest’s payment is reversed and the card issuer returns the funds to the guest’s original payment method.

Chargeback representment is when merchants submit evidence to the issuing bank to challenge a chargeback. If the evidence is compelling, the bank may reverse the chargeback.

The time frame to dispute can vary on a case-by-case basis and is set by the card issuer (Visa, MasterCard, etc.). On average, merchants have 14 days to respond, however, the deadline can be as short as 7 days. We recommend filing your dispute ASAP. Once the deadline has passed, there is no way to extend it.

During a chargeback, the system will allow you to process a refund. However, this is not advised as this will result in the cardholder receiving their money back twice: once from the refund, and once from the chargeback. If the guest is due a refund, it is advised to either accept the chargeback by not filing a dispute package, or to wait for the results of the dispute before refunding.

Allow up to 2 days for a chargeback to sync and appear on the reservation page in Guesty.

Common reasons for chargebacks

Chargebacks can occur for many reasons. The main reasons include:

• Customer disputes
• A guest not receiving a refund
• Friendly fraud
• Buyer identity fraud

Major credit card brands list over 100 reason codes. Identify and understand the reason for each chargeback, and take the necessary steps to dispute the chargeback.

Refund not received by the customer

Provide refunds within three days of a guest’s request. If you do not grant the refund, the guest may submit a chargeback to receive their funds.

Friendly fraud

Friendly fraud occurs when a guest purchases a service or stay, then claims the money back in bad faith.

Buyer identity fraud

Buyer identity fraud happens when someone uses stolen payment information to make a booking. The fraud victim will submit the chargeback request. Their credit card will be canceled and replaced for privacy and security.

Chargeback process

Guests follow these steps if they cannot resolve an issue directly with you:

1. Contact their card issuer and request a dispute against the charge. They usually have 60 to 120 days from the initial payment to do this.
2. The card issuer investigates the dispute and decides if the guest’s complaint has merit.
3. If the card issuer approves the chargeback, they forward the dispute to the acquiring bank (your bank), and debit funds from your account.
4. The acquirer sends you notification and removes the funds from your account.
5. The issuer transfers the funds back to the guest’s account.

Chargeback fees

Processing banks charge merchants a fee when a chargeback occurs. This fee covers costs for investigation, communication, and dispute resolution among the card issuer, acquiring bank, and merchant.

Your agreement with the payment processor outlines the chargeback fee amount and when fees apply.