Manage payment disputes
- Sellers with the reports permission to view disputes reporting can see open disputes.
- Sellers with the reports permission to respond to disputes can accept or challenge a dispute. Set permissions in Square Dashboard.
About payment disputes
One of the risks of accepting card payments is receiving a payment dispute, commonly known as a chargeback. It is important for your business to understand how the dispute process works, required documents, and which parties are involved.
Typically, the major parties that can be involved in the dispute process are you as the selling merchant, the buyer or customer, Square and Square’s financial partners, card networks, and the buyer’s card-issuing bank. The dispute process may vary slightly depending on the card network, but these different networks generally follow the same guidelines.
Cardholders can file disputes for a number of reasons, but the most common reasons are:
Fraudulent activity - the buyer had their card or their card details stolen, and the fraudsters use the stolen details to make payments.
Goods or services not received - the buyer made a purchase but claims they did not receive the goods or services they paid for. For example, a buyer purchased clothes online but claims they never received their items.
Goods or services not as described - the buyer made a purchase, but claims the goods or services they received were either incorrect or not of the quality they expected. For example, a buyer paid a contractor to build a patio for them, but claims the patio was either built incorrectly or poorly constructed.
Watch a video to learn more about how the process works:
Before you begin
There are no fees for dispute management services for chargebacks — we cover the fee for every dispute that we work together to challenge.
When the payment card issuer (such as Visa, Mastercard, etc.) notifies us of your dispute, they also debit Square’s account to hold the disputed funds. We let you know of the dispute right away and also place an immediate hold on the disputed funds by withholding funds from your Square balance or debiting your linked bank account.
Once the bank makes their decision, the dispute outcome is final — Square will continue challenging the dispute on your behalf.
Transaction types can affect dispute processes and timelines.
Disputes by payment type
The way a buyer pays can affect the dispute process and timelines. These payment types each have special considerations:
With Afterpay, customers pay in four interest-free installments over six weeks. For Afterpay disputes, you can manage disputes from your Square Dashboard or your Afterpay Business Hub. Learn more about Handling disputes in the Business Hub from the Afterpay Support Center.
Afterpay decides whether the dispute has been won or lost.
- If you have won the dispute, you will be notified and refunded from your Square balance.
- If you have lost the dispute, you will be notified and the customer will be refunded.
This process may take up to 30 days to review.
Automatic Clearing House (ACH) payments are electronic check payments. You can accept ACH payments to avoid the high processing fees associated with credit card payments.
An ACH dispute can occur when the buyer questions the transaction and requests that their bank reverses the debit. An ACH transaction may be returned for several reasons, but the most common are:
- Transaction was not authorized.
- Transaction is for the wrong amount.
- Transaction was duplicated.
If a customer has initiated an ACH dispute with their bank, contact your customer directly. It is possible the customer may have filed a dispute with their bank by mistake.
If they have purposely disputed an ACH payment, hire an attorney.
Square is on your side, but per National Automated Clearing House Association (NACHA) regulations, we can’t challenge an ACH dispute.
On average, consumers have up to 60 days to issue an ACH return. These return reasons include:
- ACH Unauthorized: The specific transaction is not authorized by the buyer’s bank.
- ACH Insufficient Funds: The available cash balance is not sufficient to cover the amount of the debit.
- ACH Transaction amount differs: The buyer claims that the amount debited from their bank account differed from the amount they actually authorized for the payment.
- ACH Credit not processed: The buyer claims they are owed a credit, and that they have not received a credit due to them.
- ACH Duplicate Charge: The buyer claims they have been debited twice for the same sale.
EMV stands for Europay, Visa and Mastercard — also known as the credit card companies that developed this card chip technology. The technology itself uses a tiny, powerful chip embedded in credit and debit cards to make card transactions more secure. The magnetic stripe on the back of a payment card is not considered EMV.
EMV chip cards provide a layer of protection against fraud when the card is dipped or tapped. To correctly process a transaction using an EMV-enabled chip card, the card will need to be tapped, dipped, or inserted so the chip can be read.
Liability for fraud and payment disputes belongs to whichever party is least compliant with the new EMV chip system. Today, banks resolve all payment disputes involving swiped chip card transactions in the customer’s favor if the customer claims their card was used fraudulently.
This means you’ll have to cover the loss if a customer disputes a payment you accepted by swiping their chip card.
Learn more about and compare Square hardware, including contactless options.
At your Square Point of Sale or through Square Online, customers using Cash App can complete their payment by scanning a QR code that generates on the screen.
- Fraud: The buyer claims that they never participated in the transaction themselves, and that their account or card was stolen and used by a fraudster.
- Non-fraud: The buyer acknowledges that they made the payment themselves but that the goods or services they purchased either weren’t delivered or satisfactory to what they thought they would receive.
Sellers who receive a fraud dispute from a Cash App Pay transaction are covered entirely by Square and owe no money for the dispute. They do not have to take any action to receive this coverage. This does not apply to any other payment methods.
Sellers who receive a non-fraud dispute from a Cash App Pay transaction must follow the normal disputes process, wherein they can choose to challenge the dispute with evidence and upon the cardholder’s bank’s review of the dispute, either win or lose. This is similar to how all other non-Cash App payment disputes are handled.
: If you’ve completed a payment to a vendor using Square Bill Pay and have an issue with the payment because you are dissatisfied with the vendor or the vendor hasn’t delivered the goods or services you paid for, you must resolve this with the vendor directly.
If you used a debit or credit card to complete this payment and report a dispute to your card-issuing bank, the amount of the dispute will be returned to the original payment method and withdrawn from your Square account balance.
If you did not make a payment and believe it was the result of unauthorized account activity, contact us so that Square can investigate. We’ll work with you to get you back in control of your account.
In the meantime, we recommend that you set up two-step verification to protect your account from unauthorized access. You can also reset your account password at square.com/password.
Payments disputes process
Step 1: Review the information request form
When your customer files a dispute with their bank, we notify you of the initial dispute via email. You can access the information request form via the initial notification email. You can also locate it in your Disputes Dashboard or Square Point of Sale app.
Once you receive the initial notification email, you will have seven days to submit your information. Read over the details of the dispute on the form, and pay close attention to what your customer is claiming. Take a close look at the reason code and the amount disputed — this will help you determine which transaction is being disputed and which supporting evidence to send to us.
In the form, you’ll find:
A detailed description of why your customer has initiated the dispute.
The information the bank needs to make their decision on the case.
Information on the status of your dispute, which we’ll update for you when the bank gets back to us. The status includes all documents you have uploaded so far and what’s next in the dispute process.
The exact deadline to send us the dispute documentation, if you are challenging the dispute.
Step 2: Respond to the dispute
Once you’ve read the above information, you can either provide the customer with a refund or challenge the dispute.
If you do not want to challenge the dispute, you can always return the funds from the transaction to your customer. To do this, select No in the information request form within the seven-day response timeline. Submit the form to Square, and we’ll let the bank know you’d like to return the funds to the customer.
Once you’ve responded No, you can advise your customer to look out for the refund. Once the refund is processed and sent to your customer’s card-issuing bank, it can take an additional 2-7 business days for the refund to be posted to the customer’s account. Your customer can check with their bank about when the funds will be returned to their account since the timeline to post ultimately depends on the card-issuing bank.
If you believe the disputed transaction is valid, and you want to challenge the legitimacy of the dispute, select Yes on the first question of the form and respond to the rest of the questions. Collect any supporting documentation the form asks for and attach it to the form before submitting it. We may reach back out to you if we think the bank will need more information.
Step 3: Wait for bank’s decision
If you’re challenging the dispute, the bank can take up to 90 days from the start of the dispute to make their final decision. Since this timeline is determined by the card-issuing bank, Square isn't able to speed it up.
You can view the status of your dispute at any time from Information requests on your Information requests. You can also access the form via your Square Point of Sale app by tapping ≡ More > Settings > Information Requests.
If your customer’s disputed payment was made with Afterpay, Afterpay will decide the dispute.
Step 4: Review the outcomes of your dispute
As soon as the decision is made, we’ll notify you of the bank’s ruling via email and update the status of the dispute in your Disputes Dashboard. The dispute will appear as either Won (in your favor) or Lost (in the customer’s favor).
If the case is resolved in your favor, Square will release the funds back to you as soon as we receive notice from your customer’s bank that the dispute has been resolved in your favor.
If the case is resolved in your customer’s favor, the held funds will be returned to your customer. If the funds in your Square balance aren’t enough to cover the amount of the dispute, we will debit your linked bank account to cover the disputed amount.
Per our Seller Agreement, we are not liable for any overdraft fees you may incur from debits to your bank account. To prevent any unwanted fees, please be sure to keep sufficient funds in your linked bank account to cover your largest transaction.
If your customer decides they no longer want to dispute a payment, they can contact their card-issuing bank and ask for an active dispute to be canceled or withdrawn.
Learn how to manage canceled disputes.
Step 5: Negative dispute balance (if applicable)
If we are unable to successfully hold the disputed amount from your Square balance or from debiting your bank account, your balance will then reflect the negative disputed amount. Any future payments you take will go towards the outstanding balance.
To resolve your outstanding balance:
Sign in to your Square Dashboard and click Pay balance.
Fill out the payment details.
Click Review payment.
Click Pay Balance to complete the payment.
We will send a receipt to your email on file. Once the payment is complete, your Square balance is adjusted automatically.
In cases when you accept a payment from an international card in a different currency, the discrepancy in the held disputed amount is due to the difference in the currency conversion rates at the time of the original payment versus the time the payment is disputed.