Settlement & Clearing
How authorized card transactions are submitted for clearing, how net positions are computed across thousands of banks, and how funds actually move. Covers clearing file formats, dispute timelines, and interchange fee economics.
Dispute & Chargeback Process
When a cardholder disputes a transaction, it enters a structured multi-stage process with strict deadlines. Missing a deadline results in automatic loss for the party that failed to respond. All timelines are in calendar days unless otherwise noted.
Dispute Timeline
Retrieval Request Visa only
Issuer requests original transaction documentation (receipt, signed slip). Mastercard eliminated this step. Visa deadline: within 30 days of transaction date. Acquirer response deadline: 30 days from request date.
Chargeback
Issuer formally initiates the dispute and debits the acquirer. Deadline: Visa — 120 days from transaction date (or from when cardholder disputes). Mastercard — 120 days from transaction date. Acquirer's clearing account is debited automatically.
Representment (Second Presentment)
Acquirer disputes the chargeback by re-presenting the transaction with evidence (proof of delivery, signed receipt, EMV cryptogram, 3DS authentication data). Deadline: 30 days after chargeback received. If accepted, funds returned to acquirer.
Pre-Arbitration / Final Chargeback
If issuer rejects the representment, they file a pre-arbitration. Deadline: 30 days after representment received. This is typically the last chance to settle before arbitration fees apply.
Arbitration
The card scheme makes a binding decision. Filing fees: Visa: USD 500, Mastercard: USD 250. The losing party pays the fee in addition to the transaction amount. Used sparingly due to cost and time.
Reason Code Categories
| Category | Visa Code | MC Code | Common scenarios |
|---|---|---|---|
| Fraud | 10.x | 4853 | Unauthorized use of card, card not present fraud, counterfeit card |
| Authorization | 11.x | 4808 | No authorization obtained, expired authorization, declined auth used |
| Processing Error | 12.x | 4834 | Incorrect amount, duplicate processing, paid by other means, late presentment |
| Consumer Dispute | 13.x | 4853 | Not as described, services not rendered, credit not processed, cancelled recurring |
Evidence by Dispute Type
Fraud Disputes
- EMV chip transaction evidence (chip bypassed = weak defense)
- 3DS authentication data (CAVV + ECI) — full liability shift
- IP address matching billing address
- Delivery confirmation with cardholder signature
- AVS match result at authorization
Processing Error Disputes
- Original transaction receipt showing correct amount
- Proof of only one transaction (no duplicate)
- Evidence credit was issued via other means
- Authorization confirmation for disputed amount
Consumer Dispute
- Signed proof of delivery (with cardholder signature)
- Proof of service rendered (photos, logs, timestamps)
- Cancellation policy shown to cardholder at purchase
- Communication history with cardholder
- Tracking information confirming delivery