An ACH Chargeback is a payment made with ACH that was not authorized and/or returned for different reasons.
A chargeback is also considered a Dispute for ACH payments.
Chargeback Reasons
- Insufficient funds
- The account is closed
- No Account/Unable to Locate Account (The account number entered is incorrect.)
- Non-Transaction Account (Bank accounts that are not payment accounts.)
- Corporate Customer Advises Not Authorized (The payer and the bank institution have declined the authorization for this transaction)
- Payment Stopped
How do Chargebacks work?
You will receive an email notification when there is a new chargeback or dispute:
All ACH Chargebacks are final, and there is no process to appeal. If a payer has an ACH chargeback, you must work with them directly to resolve the situation.
You can check your chargebacks by going to the Paystand Dashboard.
1. Click Transactions > Disputes
Chargeback Fee
A USD 35.00 fee will be charged for every dispute or chargeback, regardless of the status of the dispute.
EFT Chargeback
Electronic Funds Transfers (EFT) offer a convenient method for processing payments. However, there are instances where an EFT payment is reversed or fails, leading to what is commonly referred to as a chargeback. One specific error that may be encountered during this process is the EFT Request Rejected message.
Chargeback Reasons
EFT Request Rejected error indicates that the payment request has been denied by the recipient's financial institution. This rejection can occur due to various reasons, including:
- Incorrect or Incomplete Payment Information: Errors in the recipient's bank details, such as an invalid account or routing number, can lead to rejection. It's crucial to double-check all payment information before initiating a transfer.
- Insufficient Funds: If the payer's account lacks the necessary funds to complete the transaction, the EFT request will be rejected.
- Account Restrictions: Certain accounts may have restrictions that prevent specific types of transactions, leading to a rejected EFT request.
Unauthorized Debit to Consumer Account: This error occurs when a debit is made to a consumer's account without proper authorization.
Incorrect Transaction Code: This Visa-specific error indicates that an incorrect transaction code was used during processing.
Unauthorized Transaction: This error indicates that a transaction was processed without proper authorization, leading to a chargeback. Obtaining and documenting all necessary authorizations can help mitigate this risk.
Chargebacks After Payment Clearance
Even after a payment has successfully cleared, it can still be reversed through a chargeback. This can occur due to a variety of reasons, most commonly related to fraud, disputes, or processing errors. In such cases, the cardholder's bank or the card network may step in to reclaim the funds on behalf of the customer.
Key Scenarios Leading to Chargebacks:
-
Fraudulent Transactions
If a payment is later identified as unauthorized—such as in cases of stolen card use or identity theft—the issuing bank may reverse the transaction. -
Customer Disputes
Cardholders may challenge a charge if the product or service was not delivered, was significantly different from what was advertised, or failed to meet expectations. -
Operational or Processing Errors
Mistakes such as duplicate charges, incorrect amounts, or technical issues during payment processing can also trigger a reversal of funds.
Additional Resources