Learn about the high level lifecycle of payment card disputes.
A dispute occurs when an account owner contacts their bank to contest a payment to you for a number of possible reasons. When someone files a dispute, the process varies slightly across different card networks, but typically follows a standard pattern shown here:
When an account owner disputes a charge to their payment account, Zip:
- Notifies you of the dispute through the Merchant Portal and email
- Debits the disputed amount, plus a dispute fee, from your payout until the dispute is resolved
- Provides you with an explanation of the dispute and access to the account owner’s claim to their bank
- Steps you through the process of submitting convincing evidence to counter the dispute
Throughout this process, Zip facilitates your case, but doesn’t have influence over the outcome, which is at the sole discretion of the account owner’s bank.
Before the dispute
There are various ways you reduce the number of disputes received. See Dispute prevention for more.
During the dispute
When a cardholder files a formal dispute against a payment, the action initiates a chargeback where the card network pulls the funds for the dispute from Zip. Zip then debits this from your payout balance and holds it for the entire duration of the dispute. This might be for the full amount of the charge or a different amount.
The debited amount is usually less than the full order amount because Zip charges customers in a series of installments. Customers must dispute each installment charge with their bank individually and thus you may see multiple disputes for the same order number.
Cardholders can also dispute only a portion of the total charge amount. For example, a purchase of multiple products contains a single damaged item, so the cardholder files a dispute to be reimbursed for only that item.
Receiving a dispute
The initiation of a dispute triggers several processes:
- The card network debits Zip for your disputed payment and related dispute fees
- Zip in turn debits your payout for the disputed amount plus a dispute fee
- You can’t issue a refund outside the dispute process while the dispute is open
Card networks typically allow cardholders to initiate disputes within 120 days of the original payment, but their rules allow more time in some situations. Certain industries, such as travel or event ticketing—where the payment might be made long before the event occurs—are prone to longer time intervals between the original purchase and a dispute. Generally speaking, when a customer makes a payment for something that will happen in the future (like a vacation reservation, a professional services appointment, or an event ticket), the clock starts on the date of the event, not the date of the payment.
Following the creation of the chargeback, you have a limited amount of time (usually 7-21 days, depending on the card network) to respond to the card issuer.
If you submit evidence, the issuer also has a limited amount of time (usually 60–90 days, depending on the card network) to evaluate the evidence and decide the outcome.
The full lifecycle of a dispute, from initiation to the final decision from the issuer, can take as long as 2-3 months to complete. There are no actions a business can take to reliably accelerate this timeline, other than to decline to contest the dispute by accepting it in the Merchant Portal.
At the completion of the dispute process, the issuer either overturns the dispute in your favor or upholds the dispute in their cardholder’s favor.
If the issuer overturns the dispute, they return the debited chargeback amount to Zip, and Zip passes this amount back to you, and also returns your dispute fee.
If the issuer upholds the dispute, nothing changes from your perspective and no money moves—Zip credited the issuer when they initiated the chargeback. The issuer will return the funds to the cardholder at some point during—or even after—this process. The timing of the cardholder’s credit is entirely at the issuer’s discretion.
The dispute fee varies based on your contract. Zip deducts the fee from your account balance when a cardholder initiates a dispute. Zip returns this fee to your balance if you ultimately win the dispute. If a customer disputes multiple installments of the same order, you will be charged a separate dispute fee for each installment that is disputed.
Responding to a dispute
In most cases, you have the ability to challenge a disputed payment, as long as you submit strong evidence to the card issuer that invalidates the dispute claim before the deadline.
As soon as a dispute is active, the only way to overturn it is by submitting evidence in a response. Even in cases where your customer claims to have withdrawn the dispute, you must respond with evidence for the dispute to be closed in your favor. Submitting evidence is what signals to the issuer that you don’t accept the dispute and want to have the funds returned to you.
See Responding to disputes for information on how to:
- Review the cardholder’s claim
- Evaluate whether to accept or challenge the dispute
- Gather appropriate evidence to respond to the dispute
- Use the Merchant Portal to submit your response
After the decision
After you submit your evidence, the next notification from the card issuer to both Zip and you is the final decision. Zip updates the status of the dispute to won or lost and notifies you through the Merchant Portal as soon as the issuer makes its decision clear.
This outcome is final for all parties. You can’t overturn a lost dispute, but your customer also can’t overturn a dispute decided in your favor.