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Provisional Credit Reversal

Provisional Credit Reversal: How to Fight Back & Recover Lost Revenue

Provisional credits are temporary and conditional refunds that issuing banks issue to cardholders towards the start of the chargeback life cycle.

Disputes can take several days, or even weeks to resolve. So, a provisional credit is a courtesy provided by the bank to ensure the cardholder has sufficient funds while the dispute is resolved. This gives cardholders some financial cushion, and generally improves the cardholder experience.

Learn more about provisional credits

It’s a different story for sellers, though. They’re basically deemed “guilty until proven innocent,” and must show the issuing bank that they were not at fault. If a dispute is left unchallenged, a cardholder’s provisional credit becomes permanent and the merchant automatically loses the chargeback.

Fortunately, provisional credits can be reversed if the merchant has solid evidence. Today, we’re going to delve into provisional credit reversals, and the steps that merchants can take to win a reversal.

Can Merchants Reverse Provisional Credits?

When an issuing bank extends a provisional credit to a cardholder in response to a dispute, you’ll be notified and provided with a chargeback reason code, explaining why the dispute happened. You can choose to accept the dispute, meaning the provisional credit becomes permanent. Or, you can fight the dispute by providing counter evidence against the cardholder’s claims.

Once submitted to the issuer, your evidence will be reviewed against the cardholder’s claims to determine the party at fault. If the ruling favors you, then the credited amount is reversed. By compelling banks to reverse select provisional credits, you can protect yourself from fraudulent chargebacks and hold cardholders accountable for dishonest disputes.

Because so many parties must present and represent evidence across multiple sequential stages, chargeback resolution can often take between 30 and 60 days.

How Can Merchants Reverse Provisional Credits?

You should carefully examine the reason code attached to a chargeback prior to submitting any response. This will let you determine if the provisional credit was valid, or if you should try to fight it.

The chargeback representment process means you’re rejecting a dispute claim, and are going to submit convincing evidence to show that the disputed transaction is valid. Artifacts that can be furnished include delivery records, messages to and from buyers, or other proof that the cardholder authorized the transaction.

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If you understand the steps involved in chargeback representment, you’ll be better equipped to challenge and reverse provisional credits. Here’s a quick rundown of the process:

Step 01 | Identify the Reason Code

When a chargeback is filed, the cardholder’s issuing bank will provide a chargeback reason code. This 2-to-4-digit alphanumeric string helps you understand why a cardholder is disputing a transaction. You can also use reason codes to analyze past chargeback trends, draft strong rebuttal letters, and determine the type of evidence to submit.

Each credit card network has a different set of chargeback reason codes. They’ll be grouped into different categories, and may have slightly different descriptors, time limits, and evidence requirements.

Learn more about chargeback reason codes

Step 02 | Consider Your Response Time Window

Card networks and banks impose a strict response time window if you wish to fight chargebacks. Unlike cardholders, who typically have 120 days to dispute a transaction, merchants may have less than a week in which to respond to a claim.

Visa requires merchants to respond within 20 days, while Mastercard offers up to 45 days. That said, acquiring banks may impose stricter deadlines. You’ll automatically lose the dispute if you can’t respond within that time frame.

During the response time window, you should carefully analyze the reason code. If time permits, you can even try to get in touch with the cardholder to resolve the issue directly.

Learn more about chargeback time limits

Step 03 | Gather Convincing Evidence

Next, you need to gather evidence to prove you were not at fault. No two chargeback representment packages should be identica, though; the evidence to be furnished should depend on the chargeback reason code, the issuing bank, and the card network.

You need to present multiple pieces of corroborating evidence that directly refute the cardholder’s claims. You can submit evidence including shipping details, order notification emails, cardholder authorization records, sales receipts, invoices, and delivery confirmation notices.

As an example, suppose a cardholder authorized a purchase, then lied and claimed a transaction was due to unauthorized activity. Here, you can supply AVS, CVV, and geolocation information, plus past transaction data, and records of any communication with the customer.

Learn more about dispute evidence

Step 04 | Craft a Chargeback Rebuttal Letter

A chargeback rebuttal letter is a brief outline that details why the dispute (and the cardholder’s provisional credit) should be reversed. The letter should be written professionally and objectively; it should highlight the evidence supplied and allow issuers to quickly review and decide on an outcome.

Your rebuttal letter should address the claims that resulted in a chargeback based on the chargeback reason code. You should include the case number, the acquirer’s reference number, the amount under dispute, the merchant’s name, identification information, and contact details. You can also include key details about your business (e.g. the type of products sold and whether you have a physical or online presence, etc.).

Learn more about rebuttal letters

Step 05 | Submit Your Representment Package

You must submit all response documentation within the timeframe and guidelines dictated by your acquirer.

Evidence submitted for a Visa dispute should not exceed 2 MB, while Mastercard limits uploads to 10 MB. Both card networks allow PDF or JPEG uploads only. Also, documents can’t be edited once uploaded, so double-check your materials prior to submission.

Afterwards, the acquirer will review and transmit the package to the issuer, who will review the evidence and decide whether or not to reverse the provisional credit extended to the cardholder.

Learn more about rebuttal letters

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5 Tips & Best Practices to Get a Provisional Credit Reversed

As we showed above, having the right strategy in place can help you win disputes and reverse provisional credits. You’ve got to make sure your response is as strong as possible, though.

Here are several tips to improve your odds of seeing a provisional credit reversal:

Tip #1
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Make Sure Your Evidence is Actually Compelling

The evidence submitted during the representment process should directly attack the validity of the disputed transaction. Examples of compelling evidence include proof that the cardholder authorized the transaction, copies of transaction records like receipts and invoices, order confirmation messages, delivery details, and copies of your return and refund policies. But, like we mentioned earlier, the best evidence really depends on the claim.

Vague or incomplete evidence that fails to address the reason for the chargeback can lead the issuer to rule in the cardholder’s favor. The same applies for illegible or poorly scanned documents, or a disjointed and incoherent representment package.

Tip #2
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Write a Strong Chargeback Rebuttal Letter

Chargeback rebuttal letters should clearly refute the cardholder’s allegations and describe why the buyer’s provisional credit warrants reversal.

But, although the contents of each letter can be personalized, the format can be templatized. Rebuttal letters typically begin with a header and an introductory paragraph. You should then explain why the chargeback is invalid, detail the evidence provided, and request that the buyer’s provisional credit be overturned. At the bottom of the letter, merchants should provide their contact information in case the issuer has follow-up questions. You can check out this article for more information and to download a rebuttal letter template.

Tip #3
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Don’t Procrastinate

Card networks set deadlines to provide evidence to ensure chargeback cases are reviewed and resolved promptly. But, your acquirer will probably impose an even tighter deadline, because they need time to review your submission and send it to the issuer for review.

Respond to chargebacks as quickly as possible. If you wait until the last minute to submit your representment package, you may forget to include crucial evidence that could influence the outcome of their case or, worse, miss the deadline altogether and automatically lose.

Tip #4
 | 
Engage The Cardholder

Sometimes, cardholders file chargebacks because they think that asking for a refund is too big of a hassle. Contacting the cardholder directly to better understand their grievance makes it more likely that the customer will agree to a refund or an exchange; either of these options would be better than a chargeback. Cardholders who feel heard and respected may also decide to voluntarily cancel their disputes after filing them.

Present-day benefits aside, taking customer concerns seriously can strengthen long-term relationships. You may stand to benefit from buyer-provided feedback that can be internalized to prevent future chargebacks.

Tip #5
 | 
Consult Experts

Experts are intimately familiar with the chargeback representment process, and can help you draft compelling strong rebuttal letters and compile strong representment packages.

Industry-veteran chargeback specialists and fraud examiners can also provide fraud awareness training to staff and recommend process improvements to prevent future chargebacks. They can audit your financial statements, inventory, and bank statements for signs of waste, fraud, or abuse.

Get Help Reversing Provisional Credits

Handling provisional credits reversals is a lengthy, onerous, and confusing process. But, you don’t have to take on the problem alone.

With the right support, you can consistently and successfully reverse provisional credits, reduce chargebacks, and protect revenue. Chargebacks9111®’s fully-customizable dispute prevention and management platform helps merchants fight fraudulent claims effortlessly and profitably. Contact us today for a no-obligation ROI analysis.

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