TABLE OF CONTENTS
- What Causes Amex Chargebacks?
- American Express Chargeback Process
- How Does an Amex Dispute Inquiry Work?
- American Express Dispute Time Limit
- American Express Chargeback Reason Codes
- How Are Amex Chargebacks Different?
- American Express & High-Risk Merchants
- How to Win an American Express Dispute
- Should You Fight All Amex Disputes?
- How to Prevent American Express Chargebacks
- Final Thoughts on Amex Disputes
Chargebacks can be a challenge for any business, and American Express chargebacks are no exception. In this article, we explain the American Express chargeback process, clarify how these chargebacks differ from those of other card networks (Visa, MasterCard, and Discover), and give you some helpful advice about how to successfully dispute an Amex chargeback.
What Causes Amex Chargebacks?
A chargeback is a formal dispute related to a specific transaction initiated by a customer. Chargebacks go through an evaluation process during which both sides present evidence, and a third party determines the outcome.
Meanwhile, a refund is a repayment initiated by the merchant, without bank involvement. While seemingly similar, chargebacks and refunds are quite different.
Before initiating the chargeback process, the cardholder is responsible for contacting the merchant to resolve the dispute directly. If the merchant is unable to resolve the conflict with the customer, they may then escalate the transaction to a chargeback.
Some of the most common reasons for American Express chargebacks include:
- A dispute over the bill amount
- The product or service differing from its description
- Unfamiliar transaction (possible fraud)
- Product or service not rendered
- Fraudulent purchase (i.e., when someone other than the cardholder initiated the purchase)
- Lack of proper approval (for example, an employee makes a purchase not authorized by the main account holder)
American Express Chargeback Process
American Express’s chargeback approach is relatively straightforward. In this section, we look at the process as a whole and identify the different steps that Amex takes to settle its disputes.
When a cardholder formally disputes a transaction, the chargeback process is initiated. During this stage, American Express reviews the transaction data and tries to resolve the issue. If a solution is not reached, Amex has two options, described below:
If Amex believes additional information may help resolve the issue, they will ask each party for additional documentation. Once reviewed, one of two things will occur:
- Dispute Resolved: If the information received absolves the problem, the business is not hit with a chargeback.
- Chargeback: If the information received was insufficient in resolving the issue, American Express issues the chargeback.
If Amex believes they have enough information to issue a chargeback, it does so. They submit the chargeback to the business at fault and remove the disputed funds from their account. At this stage, there are two choices:
- A business can fight the chargeback with more information. If the information is enough to overturn the chargeback, American Express reverses its initial findings and credits the business’s bank account. If the information is insufficient, the chargeback remains and the customer receives their funds back.
- A business can accept the chargeback by not responding. If a business does not fight the chargeback within the specified timeframe or the information doesn’t support a reversal, Amex stands by the chargeback decision.
How Does an Amex Dispute Inquiry Work?
When the cardholder files a dispute, Amex evaluates all available data internally. American Express typically has a good amount of information available to review, as they act as both the card issuer and the card network. After reviewing the dispute-related information, American Express resolves the dispute or sends an inquiry to the business owner for more details.
As a merchant, you’ll likely receive an inquiry if a dispute has been made against you. However, American Express may not submit an inquiry if your business falls into any of the following categories:
- Your business is considered high-risk.
- Your business utilizes a chargeback monitoring system.
- The cardholder provided enough information to win the chargeback.
American Express Dispute Time Limit
Each stage of American Express’s chargeback dispute process has a different time limit. American Express cardholders have 120 days from the date of the transaction to file a chargeback, whereas merchants only have 20 days to respond to an inquiry. If the business does not respond within 20 days, the cardholder automatically wins the chargeback.
American Express Chargeback Reason Codes
To help merchants understand the underlying issue of each chargeback, American Express has created specific chargeback reason codes to help business owners interpret chargebacks.Sift. “American Express Chargeback Reason Codes | Sift”. Accessed October 31, 2022. These codes are broken down into five different category types:
- Fraud codes
- Authorization codes
- Card member dispute codes
- Processing error codes
- Miscellaneous/inquiry codes
How Are Amex Chargebacks Different?
The Amex chargeback dispute process differs from other credit card issuers in three particular ways:
- American Express handles almost the entire chargeback process in-house. Unlike competitors that act as a negotiator between the buyer and seller, American Express handles the entire process itself.
- American Express does not always accept chargebacks. On occasion, Amex will require additional information before a dispute can reach the chargeback stage.
- A dispute with American Express does not specify rules for pre-arbitration. Amex limits its disputes to two rounds and does not specify what the second pre-arbitration dispute entails.
American Express & High-Risk Merchants
American Express considers a business more likely to have a high chargeback ratio to be a “high-risk merchant.” Several additional factors go into determining whether a business is a high risk, including the business’s industry, its history of chargebacks, and its average transaction amounts.
That said, Amex is very thorough and takes many steps to protect itself from chargebacks filed against high-risk merchants.
Amex prohibited business types
Many businesses cannot accept American Express from customers due to the industry of the business. Here is a list of the business types prohibited from accepting AmexAmerican Express. “Merchant Regulations”. Accessed October 31, 2022.:
- Bails bonds
- Cash at point-of-sale from a non-financial institution
- Real estate down payments
- Debt collection
- Digital file hosting (cyberlockers)
- Door-to-door sales
- Escort services
- Foreign exchange
- Investments on futures
- Leasing merchants
- Licensed insolvency practitioners
- Marijuana-related businesses
- Mortgage payments
- Multi-level marketing/pyramid selling
- Online adult entertainment
- Pharmacies (card-not-present)
- Political party donations
- Tobacco and smokeless tobacco retailers (card-not-present)
- Top-up Wallet
- Travel-related telemarketing
- Travel tour operators
How to Win an American Express Dispute
Winning a chargeback dispute can be challenging, but there are a few things that you can do to improve your chances. First, make sure that you have clear documentation of the purchase, including the date, time, transaction amount, and product or service provided. Second, be receptive and responsive to your customers and try to resolve the issue before it gets to the chargeback stage. And finally, if you do receive a chargeback notification from American Express, respond quickly and thoroughly, providing as much information as possible. By taking these steps, you’ll improve your chances of winning an American Express chargeback dispute.
Should You Fight All Amex Disputes?
It’s not advised for businesses to fight all Amex disputes. No matter how hard a business tries to prevent chargebacks, there’s always the possibility of credit card fraud and merchant error. In both cases, you will be unable to win the chargeback challenge.
How to Prevent American Express Chargebacks
There are numerous strategies a company can implement to help reduce its likelihood of chargebacks. One of the simplest strategies is making your return policy simple and ensuring customers read it before making a purchase.
Another way to reduce chargebacks is to ensure your business name is clearly stated on the bank descriptor so customers aren’t confused by the transaction name. Additionally, it’s also suggested merchants keep transaction records for at least 12 months.
For in-person transactions, American Express recommends your point-of-sale system be EMV chip- and NFC-enabled. As for card-not-present transactions, Amex advises providing as much information to them as possible.
Final Thoughts on Amex Disputes
Chargebacks are arguably one of the hardest parts of running a business, as they can become time-consuming and costly. It’s difficult to know when they are coming, and sometimes they’re entirely out of your control. The American Express chargeback process is no different than other card issuers in this regard, but staying in constant communication with the card network is especially crucial since they’re more involved than other entities in each dispute. That said, implementing effective chargeback mitigation tools and taking the proper steps to establish good relationships with your customers are two of the most effective ways of preventing future chargebacks and chargeback-related headaches.