American Express, the 3rd largest credit card network in the US market, has over 133 million active cards worldwide and an average spend of $23,500 per card member annually.
Properly managing AMEX chargebacks is essential for merchants to minimize losses and maintain a strong relationship with American Express. This guide covers statistics and the nuances of AMEX chargebacks and offers strategies manage them.
An Overview of AMEX Chargebacks
AMEX chargebacks differ from those of other card networks due to American Express’s unique role as both an issuing bank and, in some cases, an acquirer. This dual role means that AMEX chargebacks involve direct interaction with American Express, unlike chargebacks from Visa or Mastercard, which typically involve third-party issuers, called issuing banks.
Statistics on AMEX Chargebacks
Chargebacks are a significant concern for merchants, as they lead to financial losses and strain relationships with payment processors.
Chargeback Frequency
American Express has a unique position in the market due to its dual role as a card issuer and network, which affects its chargeback dynamics. According to a report by the Nilson Report, AMEX chargebacks occur at a rate of approximately 0.65% of total transactions, which is lower than the average rate for Visa and Mastercard, both of which have a chargeback rate of about 0.75%.
Win Rates
Merchants’ success in disputing chargebacks varies across different card networks. For AMEX chargebacks, merchants have a win rate of around 28%, which is lower compared to Visa and Mastercard, where the win rates are approximately 35% and 33%, respectively. This lower win rate can be attributed to AMEX’s stringent review process and its role as both the issuer and network.
Reason Codes
The most common chargeback reason codes for AMEX chargebacks include:
- Authorization Issues: Accounting for 23% of AMEX chargebacks, these occur when transactions are processed without proper authorization.
- Fraud: Representing 30% of chargebacks, these involve unauthorized or fraudulent transactions.
- Product or Service Issues: Comprising 20% of chargebacks, these disputes arise from issues with the quality or delivery of products or services.
- Processing Errors: Making up 15% of chargebacks, these involve errors such as incorrect amounts or duplicate charges.
In comparison, Visa and Mastercard also see a high incidence of fraud-related chargebacks, but the distribution of reason codes varies slightly, with a higher percentage of disputes related to processing errors.
Financial Impact
AMEX Chargeback Comparison with Visa and Mastercard
- Chargeback Rates: AMEX has a slightly lower chargeback rate (0.65%) compared to Visa and Mastercard (0.75%).
- Merchant Win Rates: AMEX has a lower merchant win rate (28%) compared to Visa (35%) and Mastercard (33%).
- Average Chargeback Amount: AMEX chargebacks involve higher average amounts ($200) than Visa ($180) and Mastercard ($175).
- Resolution Time: AMEX takes longer to resolve chargebacks (45 days) compared to Visa and Mastercard (30-35 days).
The AMEX Chargeback Process
The chargeback process begins when a card member disputes a transaction by contacting AMEX. The typical steps are as follows:
Initial Review: An AMEX agent reviews the card member’s claim. The claim may be dismissed if the charge is deemed valid, or a chargeback may be initiated if the claim is found legitimate. Alternatively, a merchant inquiry may be sent, requesting additional information.
Merchant Inquiry Responses: Merchants have several options when responding to an inquiry:
- Accept the chargeback.
- Issue a credit or refund.
- Provide evidence of a previous credit.
- Submit sufficient evidence to validate the original transaction.
Ignoring an inquiry is highly discouraged as it can result in an automatic chargeback and damage the merchant’s reputation.
Time Limits for AMEX Chargebacks
Each card network has its own specific timeframes for both cardholders and merchants, and these differences can significantly impact how merchants handle chargebacks.
For American Express (AMEX), card members typically have up to 120 days from the transaction date to file a chargeback. This period may be extended at AMEX’s discretion in certain situations, such as disputes involving delayed delivery or services rendered over a longer period. Once a chargeback is initiated, merchants have a relatively short period of 20 days from the Central Site Business Date (the date AMEX processes the chargeback) to respond and contest the chargeback. This brief window requires merchants to act swiftly and efficiently to gather evidence and submit their rebuttal.
In comparison, Visa cardholders also have 120 days from the transaction date to initiate a chargeback, with possible extensions for specific circumstances like travel services or pre-ordered items. However, Visa provides merchants with a longer response period of 30 days to address the chargeback dispute. This extended timeframe compared to AMEX gives merchants more time to collect and present evidence to support their case.
Mastercard follows a similar pattern, allowing cardholders 120 days from the transaction date to file a chargeback, with potential extensions for future delivery or services. Mastercard offers merchants the most extended response period of the three networks, providing 45 days to respond to a chargeback. This generous timeframe allows merchants additional time to prepare a comprehensive response and gather necessary documentation.
The key differences lie in the merchant response periods. While AMEX provides the shortest timeframe of 20 days, Visa offers a moderate 30-day period, and Mastercard provides the longest at 45 days. These variations significantly impact how merchants prioritize and manage their chargeback responses. Merchants dealing with AMEX disputes need to be particularly prompt, reviewing chargeback notifications immediately and maintaining organized transaction records to streamline the response process.
AMEX Chargeback Reason Codes
- Authorization Issues: Transactions processed without proper authorization.
- Fraud: Unauthorized or fraudulent transactions.
- Product or Service Issues: Disputes over the quality or delivery of products or services.
- Processing Errors: Errors in processing the transaction, such as incorrect amounts or duplicate charges.
The American Express Dispute Center
The AMEX Dispute Center provides a transparent platform for resolving disputes. This online portal allows card members to report unauthorized transactions, open billing disputes, check dispute statuses, and cancel disputes.
The Dispute Center also facilitates communication between merchants and card members, promoting faster and fairer resolutions.
SafeKey: Enhancing Security
American Express SafeKey is a 3D Secure service that uses real-time authentication to verify card users before processing transactions. SafeKey helps reduce fraud by detecting stolen cards and unauthorized users.
According to AMEX, SafeKey 2.0 enhances the exchange of detailed information between merchants and issuers, reducing the need for one-time passcodes and minimizing checkout friction.
Steps for Merchants to Manage AMEX Chargebacks
Here is a high level overview of the steps for merchants to manage AMEX chargebacks:
Review Chargeback Notifications: Carefully review all documentation provided in the chargeback notification before taking any action.
Understand the Reason: Identify the specific reason for the chargeback and tailor your response to address this issue.
Gather Supporting Documentation: Collect all relevant documentation, such as sales receipts, invoices, and shipping records.
Prepare a Detailed Response: Write a concise but comprehensive response letter, including all evidence to support your case.
Submit the Response Promptly: Ensure your response is submitted within the required timeframe to avoid automatic loss of the dispute.
Maintain Open Communication: Keep respectful communication channels open with the cardholder to address their concerns and potentially resolve the issue outside the chargeback process.
Preventing AMEX Chargebacks
Chargeback prevention is the most effective strategy for managing chargebacks. Here are some best practices:
- Clear Communication: Ensure customer service contact information is easily accessible and prominently displayed. Clearly communicate return or exchange policies and other terms of service before checkout.
- Verification Measures: Always request the Card Identification Number (CID) for card-not-present transactions and use the Automated Address Verification Service (AVS) to validate card member information.
- Prompt Processing of Credits: Process refunds immediately when necessary and inform card members about the refund timeline. A prompt refund can prevent chargebacks.
