Chargebacks in Canada: how a dispute works and how to answer one.

The short answer

• The issuer and the card network decide. Your provider passes the dispute to you and sends your reply back.
• Reply to the reason code. Send proof that answers the exact claim, such as delivery proof for "not received".
• The deadline is on the notice. Visa says the time limit can vary by acquirer. Mastercard says missing it loses the dispute by default.
• A refund before a dispute is usually cheaper. Visa tells merchants to credit a valid complaint quickly.
• Interac Debit has no chargebacks. Interac says its "good funds" model removes the risk. Visa Debit and Debit Mastercard follow card network rules.

What a chargeback is

Visa describes a dispute as the issuer's way to return a contested sale. The issuer is the customer's bank. The acquirer is the bank or provider that takes card payments for you. If the dispute is valid, the acquirer takes the amount from your account and tells you. If you cannot fix it, Visa says the loss is yours.

Mastercard calls it first-party or "friendly" fraud when a cardholder challenges a genuine sale, by mistake or on purpose. Its First-Party Trust program, which helps issuers spot these cases, now covers Canada. For the short definition, see our chargeback glossary entry.

How a chargeback moves

Each step in Visa's dispute path has its own time limit.

1. The cardholder disputes the sale with their issuer.
2. The issuer checks the claim and sends the dispute through the card network.
3. The network passes it to your acquirer.
4. Your acquirer, through your provider, tells you and debits the amount.
5. You accept it, or reply with proof by the deadline. The issuer then decides.

Mastercard says the issuer makes the final call. If you win, the amount comes back to your account. Some cases go on to arbitration run by the network.

The four dispute categories

Each dispute arrives with a reason code from one of four families.

How to respond, by dispute type

Both networks say to send proof that answers the reason code. Mastercard adds a short cover letter that sums it up. Visa asks for legible copies in English or with an English translation, so translate French documents. If you already refunded the sale, send the refund record with its date and amount.

For card-absent fraud, Visa also accepts two earlier undisputed sales to the same cardholder, settled 120 to 365 days before the dispute, that share data such as the device ID or IP address. If your evidence is weak, Visa notes that accepting the dispute can save time and cost.

Deadlines

Visa's guide gives no single merchant deadline and says it may vary by acquirer. Mastercard says acquirer deadlines average 10 to 35 days. Its Chargeback Guide gives the acquirer 45 calendar days after most chargebacks to reply. The card network sets the limits, and your provider tells you the deadline on each notice. Yours can be much shorter than the network's.

How to prevent chargebacks

Visa says most disputes come from avoidable processing mistakes. These habits come from its prevention list.

• Clear descriptor. Make sure your business name, city and province on the customer's statement are easy to recognize. Visa suggests buying from your own store and checking.
• Clear receipts and policies. Print your name legibly. Show the refund policy at checkout, with a box the customer must accept.
• AVS and CVV2. Use the address and card code checks on every online and phone order.
• [3-D Secure](/resources/glossary/3-d-secure) online. Visa says a Visa Secure authenticated sale is protected from certain fraud disputes if processed correctly. Liability rules vary by region, so check with your acquirer.
• Refund before a dispute. Credit a valid complaint quickly and tell the customer in writing.
• Delivery proof. Ship before you charge for card-absent orders. Use tracking or signature delivery for valuable items.
• Honour cancellations. Stop recurring billing when a customer cancels, and confirm it in writing.

Fees, your statement and excessive disputes

You lose the sale amount, and often the goods. Mastercard says the merchant pays a chargeback fee whether or not it is liable for the chargeback. The Code of Conduct for the Payment Card Industry in Canada lists a chargeback fee among the fees your provider must disclose. Look on your statement for lines named chargeback, dispute, reversal or adjustment. Our card processing fees guide explains where these sit among your other costs.

Visa checks dispute activity every month and tells acquirers about merchants with excessive disputes. The acquirer must then act, often with a plan to cut them. Mastercard says a high chargeback ratio can bring higher fees or a frozen account, and a won chargeback still counts in it.

Interac Debit is different

Interac says Interac Debit uses a "good funds" model. Money moves from the customer's bank account to yours in real time, so Interac says there are no chargebacks. If someone uses a debit card without the owner's consent, the cardholder's own bank handles it under Interac's Zero Liability Policy and the client agreement. FCAC says debit cardholders are protected against unauthorized transactions in stores and at ATMs.

Visa Debit and Debit Mastercard run on the Visa and Mastercard networks, so their disputes follow those rules.

Where CleverPays fits

The card networks write the dispute rules, and the issuer decides each claim. Your provider and acquirer carry the notice and your reply. You keep the records and answer on time. CleverPays does not decide disputes, set network rules or give legal advice. Where a dispute turns on a contract or the law, check with your lawyer or acquirer.

We can explain a chargeback notice and its reason code. We can help you gather the right evidence and meet the deadline. We can set up fraud tools such as AVS, CVV2 and 3-D Secure, and test them with you. We can review your statement for chargeback fees, in English and French.

Common questions