System updates

We’re experiencing issues that may affect your Square services. We’ll continue to update our status page with more information.

Home>Processing Payments Safely

Payment Disputes Process

With any transaction, there’s always a risk that your customer will dispute the validity of their purchase. Customers have the right to dispute purchases they disagree with by asking their bank to reverse the charge. Square does not decide the final outcome of payment disputes. That decision will be made by the bank that issued your customer’s credit card (like Visa or MasterCard).

Our aim throughout the disputes process is to help you send relevant evidence to your customer’s bank that gives you the best chance of protecting your sale. The bank is looking for any supporting evidence you may have about the transaction, such as contracts, invoices, email correspondence, or signed proof of delivery. You will have a short seven-day window to submit your information. The more evidence you can provide, the better chance you have of winning the dispute.

Watch a video to learn more about how the process works:

Our Disputes Resolution Team can help you submit documentation to make your case to your customer’s bank. You’ll have our full support and guidance throughout the process – at no extra cost.

Note:
Square does not charge any additional fees for dispute management.

Types of Disputes

One of the inherent risks of accepting card payments is receiving a payment dispute, commonly known as a chargeback. For the protection of your business, you need to understand how the dispute process works at a high level and what parties are involved.

EMV payment disputes

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 or inserted (“dipped”) – so the chip can be read.

Dipping or tapping a chipped card – or using a secure form of payment like Apple or Google Pay – is your best defense against in-person payment disputes. Liability for fraud and payment disputes belongs to whichever party is least compliant with the new EMV 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.

If you swipe a chip card when you should have dipped, issuers will not reimburse you 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’s hardware, including contactless options.

ACH payment disputes

Automatic Clearing House (ACH) payments are essentially an electronic version of paying by check. An ACH dispute can occur when the buyer questions the transaction and requests that their bank reverses the debit.

Unlike credit card disputes, all ACH disputes are final. Nacha is the governing body that defines rules and standards for ACH payments, and it does not allow a formal process for challenging ACH disputes. Per Nacha regulations, Square cannot challenge an ACH dispute.

Learn more about ACH payment disputes.

Cash App disputes

At your Square Point of Sale or Square Online, customers using Cash App can complete their payment by scanning a QR code that generates on the screen on your point of sale device or in your online store.

Just like other types of payment disputes, buyers can file disputes for Cash App Pay transactions for two types of reasons:

  • 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. 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. Note that does not apply to any other payment methods.

  • 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 non-fraud dispute from a Cash App Pay transaction are not covered by Square.

They 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.

Learn more about Cash App Pay in our Support Center.

Dispute Process Timeline

Prevention is our collective focus, but we know that despite best efforts, disputes may still occur. To defend yourself when a dispute does happen, you need to provide compelling evidence to your customer’s bank showing that their reason for filing the dispute is invalid. You can submit relevant documentation to defend open disputes in your Disputes Dashboard.

Dispute notifications

When your customer initiates a dispute, their bank contacts Square to get more information about the transaction. We will send you an email notifying you about the dispute and direct you to your Disputes Dashboard.

You can find information about ongoing disputes here and in the Square Point of Sale app under Reports. We populate the Disputes Dashboard with the dispute information that your customer’s bank sends us.

The customer’s bank is looking for any supporting evidence you may have about the transaction, such as contracts, invoices, email correspondence, or signed proof of delivery. The more evidence you can provide, the better chance you have of winning the dispute.

Parties involved in the dispute process

Typically, the major parties involved in the dispute process are:

– Square
– Square’s financial partners, such as our acquiring and banking partners
– The card networks (Visa, Mastercard, American Express, Discover)
– You, the merchant
– The buyer, also known as the customer or cardholder
– 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.

Holds on disputed funds

When your customer files a dispute with their bank, we let you know about the dispute right away. We will also place a hold on the disputed funds for the duration of the dispute process and will release the funds back to you if we receive notice 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 there aren’t enough funds available in your Square balance, we will debit your linked bank account to cover the disputed amount.

  • If we are unable to successfully hold the disputed amount from your Square balance or by debiting your bank account, your Square balance will reflect the negative disputed amount. Any future payments you take will go towards the outstanding balance.

When the card issuer notifies us of your dispute, we place a hold on the disputed funds by either withholding the funds from your Square balance or initiating a debit to your linked bank account.

  • If the initial withholding or debit was successful, the funds will be released as a credit to your bank account three to five business days after the case is resolved.
  • If the initial attempt to debit your bank account was unsuccessful and/or your Square balance was used to cover the dispute, the deferred funds will be released back to your Square balance.

Note: Per our Square Seller Agreement, we are not liable for any overdraft fees you may incur from debits to your bank account. To prevent any unwanted fees, make sure to keep sufficient funds in your linked bank account to cover your largest transaction.

Access your information request form

To send Square the information you would like us to pass on to your customer’s bank, you will need to access the information request form we sent you in the initial dispute notification email. You can also find it in your Disputes Dashboard or in your Square Point of Sale app > More > Reports > Disputes.

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 deadline for sending us your information – you will have a seven-day window to submit your information. 

Respond to the Dispute

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.

Reasons customers dispute payments

Your best defense against in-person payment disputes is dipping or tapping a chipped card using – or using a secure form of payment like Apple or Google Pay.

If you swipe an EMV chip card when you should have dipped, and your customer claims their card was used fraudulently, the bank will resolve the payment dispute in your customer’s favor. This means that if a customer disputes a payment you accepted by swiping their chip card, you’ll have to cover the loss.

Learn more about and compare Square’s hardware, including contactless options.

Though there are many reasons a customer may dispute a payment, here are a few additional key reasons a payment may be disputed:

  • Goods or services not received: A customer claims to never have received the goods or services they purchased. For example, a buyer purchased clothes online but never received their items.
  • Goods or services not as described: A customer made a purchase, but 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 the patio was either built incorrectly or poorly constructed.
  • Canceled: A customer claims to have canceled their order but was still charged for the transaction.
  • Credit not processed: A customer claims to have returned or canceled their order and did not receive a credit or refund in line with the return policy.
  • Processing error: A customer claims they were charged the incorrect amount or charged twice for the same goods or services.
  • Fraudulent activity: A customer had their card or their card details stolen, and the fraudsters use the stolen details to make purchases.
  • No knowledge of charge: A customer does not recognize the transaction.
  • Unauthorized: A customer claims they did not authorize the transaction.

You then have two ways to proceed:

Return the funds

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.

Challenge the dispute

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.

Send Square Documentation and Information

If you decide to challenge the dispute, the customer’s bank will be looking for supporting documentation and information related to the disputed transaction – such as receipts, invoices, email correspondence, proof of delivery, or photos.

The documentation you send us should help us directly remedy the customer’s claim. For example, a signed receipt alone would not be effective evidence to challenge a dispute in which the customer claims the goods were not received. Their bank would need to see proof of delivery, as well.

You will have a short seven-day window to submit your information. This deadline is determined by the card network, not Square, and may vary across different networks. You can locate the deadline for sending your information in your Disputes Dashboard online or Square Point of Sale app > More > Reports > Disputes. Once you submit the information request form to Square, additional information can not be shared with the bank.

Documentation to send Square

Here are some examples of supporting documentation and information worth sharing with your customer’s bank:

  • Signed terms and conditions: To strengthen your case, you should provide evidence showing your customer acknowledged and signed your business’ terms and conditions at the time of payment. A signed and dated contract that shows full terms and conditions of a sale is especially helpful in defending against payment disputes.
  • Proof of services rendered: A signed and dated document outlining the services provided and the buyer acknowledging they have received the services, like an itemized invoice – or other proof of the services rendered, like screenshots from social media.
  • Proof of delivery: This can include a delivery confirmation from FedEx, USPS, etc – or other proof of the buyer in possession of the goods, like screenshots from social media.
  • Proof of government-imposed restrictions: Sometimes state, local, or federal government restrictions can affect a business’ ability to continue providing services.

Customer communication to share with Square

Providing the bank with proof that you took proactive steps to remedy an issue is an important way to strengthen your response to a dispute. If you have made an effort to resolve issues that may relate to the dispute – or had to postpone or cancel a delivery – we encourage you to share relevant screenshots or photos of these conversations.

We recommend you gather and upload the following types of documentation that illustrate how you offered assistance with resolving the customer’s issue:

  • Offering a partial refund to your customer: If you provided partial goods or services, you can provide signed proof of the goods or services and include an invoice or itemized receipt showing a breakdown of the transaction amount and the refund amount.
  • Offering a refund outside of Square: We strongly recommend issuing all refunds through Square, and back to the card used for the original payment. This decreases your chance of losing a potential dispute, as well as lowering the risk of scams or fraud that may occur from refunding outside of the card network.
    Note: If you and your customer agreed on a refund outside of your Square account, providing proof of the refund is ideal. For example, photos of the front and back of a refund check that has been signed by the customer.
  • Offering a credit voucher for future use: You’ll need to provide proof that the credit voucher has been provided to the cardholder. You can strengthen this documentation by specifying the time frame the credit voucher will remain valid.
  • Offering to reschedule services or delivery of goods: Providing specific dates if possible can help strengthen this support further.
    Collect any supporting documentation the form asks for and attach it to the form before submitting it. Square will then send the information you provide us to your customer’s bank. We may reach back out to you if we think the bank will need more information.

Note: If you are not able to send us your information within the allotted time, Square will have to represent the dispute with  any information about the disputed payment we already have, which decreases the likelihood of winning a dispute.

Wait for the Bank to Resolve the Case

After your documentation is submitted to Square through your Disputes Dashboard, we’ll review your documentation and forward your information to your customer’s bank. In your Disputes Dashboard, you can also view the status of the dispute, all the documents you uploaded, and what’s next in the dispute process.

Dispute outcome timeline

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 bank, we aren’t able to speed it up. 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.

Once the bank makes their decision, the dispute outcome is final — Square will not be able to continue challenging the dispute on your behalf.

If the bank resolves the case in your customer’s favor

Your customer will receive a refund for the disputed amount. Unfortunately, when the bank makes their decision, it is final — Square will not be able to continue challenging the dispute on your behalf. If you don’t have enough funds to cover the cost of a lost payment dispute, you can discuss your available repayment options with our Recovery Team.

If the bank resolves the case in your favor

If the initial withholding or debit was successful, the funds will be released as a credit to your bank account three to five business days after the case is resolved.

If the initial attempt to debit your bank account was unsuccessful and/or your Square balance was used to cover the dispute, the deferred funds will be released back to your Square balance. You can then transfer or spend your Square balance as normal.

Note: Once the bank makes their decision, the dispute outcome is final — Square will not be able to continue challenging the dispute on your behalf. If you want to pursue the case further, you’ll need to resolve it with your customer directly or seek legal recourse.

Dispute Cancellations

If you and your customer directly resolve the dispute before the bank makes a decision, you can ask the customer to contact their bank to cancel the dispute. Cancellations can be requested any time during the dispute process before it is closed.

Dispute cancellation process

While a customer may state that they intend to cancel a dispute, we recommend that you respond to the dispute with evidence as if the normal dispute process will be followed. Providing evidence gives you a greater chance of winning the dispute in the event the customer changes their mind or forgets to reach out to their bank to cancel the dispute.

Note: You cannot cancel a dispute on your customer’s behalf. The customer will need to contact their card-issuing bank directly to cancel the dispute.

Mastercard, Visa, or other non-American Express card

If your customer made the purchase using a Mastercard, Visa, or other non-American Express card, you and your customer must follow these steps to have the dispute canceled:

  1. Your customer contacts their bank: If your customer agrees to cancel the dispute, ask them to contact their card-issuing bank and request the dispute be canceled.
  2. Your customer requests a cancellation letter from their bank: This letter is evidence that the cancellation was processed successfully. The cancellation letter is an official letter or email from the bank and cannot be replaced with an email or text message written by the buyer.
    Note: Without a cancellation letter, you will not be able to move forward with the cancellation process.
  3. Ask your customer to send you a copy of the cancellation letter: The letter your customer shares with you must contain their bank’s letterhead and must be in JPEG, PDF, PNG, TIFF, or HEICC format. The max file size is 50 MB.
  4. Send a copy of the cancellation letter to Square: Select the dispute from your Disputes Dashboard, scroll to “Cardholder canceled dispute?”, and select Upload cancellation letter.

You can track the progress of the cancellation and any returned funds in your Disputes Dashboard.

Once you submit a cancellation letter, you will have a response within five business days. If the letter confirms the dispute was canceled, we will release the respective payment hold on your account.

American Express card

If your customer made the purchase using an American Express card, you and your customer must follow these steps to have the dispute canceled:

  1. Your customer contacts American Express: If your customer agrees to cancel the dispute, ask them to contact American Express and request the dispute be canceled.
  2. Your customer confirms the dispute has been canceled: Once your customer confirms with you that they successfully contacted American Express and canceled the dispute, go to your Dashboard.
  3. Inform Square of the cancellation: Select the dispute from your Disputes Dashboard, scroll to “Cardholder canceled dispute?”, and select Cardholder canceled.

You can track the progress of the cancellation and any returned funds in your Disputes Dashboard.

Once you notify Square, our team will contact American Express to confirm the customer successfully canceled the dispute and will update you via email within five business days. If American Express confirms the cancellation, we will release the respective payment hold on your account.

Best Practices

You have a better chance of avoiding disputes — and when they do happen, of convincing your customer’s bank that you’re in the right — by following a few best practices.

Make your sales policies clear

If a customer disputes a payment for a service or a product that wasn’t refundable, you will need to provide their bank with more than just a signed receipt. Presenting a “no returns, refunds or cancellations” sign at the register is also not sufficient on its own. The bank needs evidence the customer was aware of your refund, return, and cancellation policies.

Evidence that your customer acknowledged and signed your business’ terms and conditions at the time of payment will help to strengthen your case. This includes policies such as:

  • Cancellation or refund policy: This policy outlines how long the cardholder has to cancel services and receive a full or partial refund. We recommend you include any cancellation fees or restrictions that apply.
  • Rescheduling policy (if applicable): This policy describes how you plan to deliver the services on a new date when the original date is no longer available and how long the cardholder has to change the date of services.
  • “Force Majeure” clause (recommended): This policy shows the steps taken by your business when services are postponed due to unforeseeable circumstances. Note: A Force Majeure clause alone is not sufficient to remedy a dispute.

Learn more about customizing your receipts and invoices.

Create a contract

Obtaining customer signatures is an important step in protecting your business from disputes as it shows the cardholder has acknowledged your policies. Contracts allow you and your customer to understand exactly what is expected from your transaction. You can develop your own set of terms, then use a tool like Square Contracts to quickly create and customize a contract for free.

If you aren’t familiar with creating a contract, you can use one of the templates available in your Square Dashboard by going to Customers > Contracts > Templates. There are a few ways you can send a contract to your customers:

Note: Square is not a law firm, an attorney, or a professional advisor in any industry. Square provides these templates to individuals who choose to prepare their own contractual documents and does not constitute legal advice.

Confirm your business name

If your business name isn’t saved correctly in your Square Dashboard or doesn’t reflect the types of goods or services you provide, your customer may be confused when they review their bank statement. When they see a name they don’t recognize, they’ are more likely to call their bank and initiate a dispute.

We recommend not using your personal name as your business name because customers will be looking for your business name on their statement. If you don’t have a business name, use your service type followed by the name of the city where you provide the service (like “Taxi - Austin, TX” for a taxi service based in Austin).

Proof of address

Having an established physical address creates more confidence and trust when it comes to disputes. Any type of bill with your name or your business’ name on it accompanied by a current physical address is acceptable. If your business does not have a physical location or you run your business from home, provide a document with your home address. Typical examples include utility bills, cable/internet bills or tax returns.

Communicate with your customers

Open communication with your customers is one of the best ways to clear up confusion and reduce the likelihood of disputes. It helps to clearly communicate your expectations around pricing, sales tax, delivery, shipping, and the services you provide.

Check out our full suite of Customer Engagement tools to create better experiences for your customers.

Note: Square does not have any influence over or determine the resolution of the chargeback process and can only support the merchant by helping present a sound case for review.

Learn more about: Payment Processing

Can't find what you need?