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How to Handle Chargebacks at Your Hotel


Have you ever used a product and wondered why a specific piece of it exists or what it’s there for? It turns out a lot of everyday items you use have actual purposes for them – like the grooves on the bottom of a wine bottle are for preventing the bottle from tipping over and the hole in a spaghetti spoon is for measuring exactly one portion of pasta.

Chargebacks and refunds are two things that can happen when a customer disputes a transaction. Both have their purposes, but what some may not realize is that they have different outcomes.

A chargeback is when a customer disputes a credit card transaction with their bank instead of the merchant and requests a reversal of the transaction. The customer gets to keep both the good or service and the money from the transaction. Chargebacks can be tied to fraudulent activities.

refund is when a customer goes directly to the merchant that they purchased the good or service from and requests a reversal of the transaction. The individual gets their money back but is required to return the good or service that was purchased.

In this post, we’re going to focus on chargebacks and the following:

  • When should chargebacks be filed?
  • How to strengthen your chargeback representment case?
  • Is it worth filing one?
  • What does a Chargeback team look like?

The following excerpt comes from the piece How to Protect Your Hotel from Payment Fraud and Chargebacks. Watch this short video to get a peek of what’s in the guide!

When should chargebacks be filed?

Not all guests who file chargebacks have an ulterior motive. Sometimes, it comes down to a lack of understanding between chargebacks and refunds. While neither is ideal for a hotel, a refund would be better to request than a chargeback. But, unfortunately, there are fraudsters that see this as an easy loophole to commit chargeback fraud.

It’s important to educate guests on the difference between chargebacks and refunds because they have different outcomes. Consider including the following information in your hotels’ policies.

Chargebacks should only be filed in special circumstances.

  • The good and/or service isn’t what the guest ordered.
  • There are signs of fraudulent activity with your credit card.

Can chargebacks be eliminated?

No, it’s impossible to eliminate chargebacks. As long as credit cards are being used to purchase goods and/or services, and guests have the ability to reverse transactions, they’ll exist. However, hotels can take precautions to reduce the potential for chargebacks. It takes a combination of technology, standardized procedures and processes, and staff training to mitigate chargebacks.

Is it possible to win a chargeback?

It’s possible to win a chargeback, but it’s not easy. There are two laws, The Truth in Lending Act and The Fair Credit Billing Act, that protect customers from questionable business practices. These laws laid the groundwork for chargebacks. Additionally, credit card companies have their own chargeback rules.

Unfortunately, these rules and regulations are being used as a weapon against merchants now. Hotel teams need to have an action plan if a chargeback occurs.

Some ways to increase your chances of winning a chargeback representment case include:

  • Maintain a thorough record of all your guests. This might seem tedious, but having evidence is a critical part of building a solid case.
  • Understanding the chargeback reason code associated with a potentially fraudulent transaction. This can help you when you file a case.

Keep in mind these don’t guarantee you’ll win a chargeback representment case. These are ways to strengthen your dispute.

Should I always file a chargeback representment case?

It’s worth disputing a chargeback if it relates to fraudulent activity. However, every hotel is different and not all properties have the bandwidth to devote to fighting chargebacks. With every chargeback filed, there’s a risk for lost revenue so you have to ask yourself if it’s worth eating up the cost. It’s really your call. To increase your chances of winning a dispute, you need to have comprehensive evidence.

With chargeback reason codes, you can use them to determine where your chargebacks are stemming from. This can help to inform your fraud strategy since chargebacks are a part of fraudulent activity. Your win rate helps you build stronger cases when dealing with chargeback disputes and can help you identify the type of payment fraud taking place at your hotel. All this information can help you develop a stronger and more comprehensive fraud defense strategy.

What’s a chargeback reason code?

A chargeback reason code is a number that helps to inform a hotel why a chargeback was filed. Chargeback reason codes vary by the credit card company. Here are a few high-level examples.

Visa organizes their chargeback codes by categories. Check out these codes under their fraud category.


  • Reason Code: 10.1
  • Reason: EMV Liability Shift Counterfeit Fraud
  • Reason Code: 10.2
  • Reason: EMV Liability Shift Non-Counterfeit

Here are some examples for Discover.


  • Reason Code: UA01
  • Reason: Fraud Card Present Environment
  • Reason Code: UA02
  • Reason: Card-Not-Present Environment

What does a Chargeback team do? 

These are some responsibilities that could fall under a dedicated chargeback individual or team. You can always tailor this role based on your hotel’s processes, systems, and team structure though.

  • Work with guests, banks, and processors throughout the chargeback representment process
  • Create and implement best practices on fighting chargebacks
  • Develop, analyze, and report on metrics to measure performance
  • Collaborate with IT team/person to identify where fraud is happening
  • Provide guidance during the chargeback process and resolve merchant and buyer discrepancies

Just like there are things about everyday objects you may not know about, the same can be said for chargebacks and refunds. It’s worth highlighting the differences in your hotel policies so that guests are aware. And if you have to dispute a chargeback, then make sure you have strong evidence to defend yourself. It can increase your chances of winning one.

For more ways on how to reduce chargebacks and fraudulent activities, check out our guide How to Protect Your Hotel from Payment Fraud and Chargebacks.