Support Services

Mastercard Refund Transactions

Currently, when a merchant initiates a refund transaction to credit funds to a Mastercard, Debit Mastercard, or Maestro cardholder, the transaction doesn’t involve issuer authorization. Without an authorization request, issuers are not aware a merchant has given the cardholder a refund until the First Presentment/1240 clearing message or the Financial Transaction Advice/0220 force post message from a single message Debit Mastercard issuer has been received.

Mastercard is introducing refund authorization support to encourage faster refund processing and reduce refund-related customer service burdens on merchants. Mastercard is also implementing a five-day time frame for submission of a refund transaction First Presentment/1240 message. 

What’s Changing?

Effective Date



April 18, 2020, Acquirers outside the UK and Ireland April 22, 2020, UK and Ireland acquirers

Acquirer readiness: Acquirers and their processors must be capable of sending refund transaction authorization requests and forwarding the issuer’s response to the merchant. Merchants may choose to initiate refund transaction authorization requests.


April 18, 2020

Information to cardholders: Issuers must make information about pending refund transaction available to cardholders by at least one communication method, such as an online banking or other cardholder-facing application, or transaction alerts. Non-reloadable prepaid programs are excluded from this requirement.


April 18, 2020

Presentment time frame: Acquirers must present a refund transaction no later than five days after the date on which the merchant agrees to provide a refund to the cardholder. (Applies to all refunds, whether or not authorized.)


April 18, 2020

Dispute rights: (1) An issuer may initiate a message reason code 4842 (Late Presentment) dispute for a refund transaction submitted after the refund transaction presentment period has expired. (2) An acquirer may submit a Credit Previously Issued a second presentment to a message reason code 4853 (Cardholder Dispute) dispute by providing compelling evidence that the merchant provided a refund by means other than a credit to the card. Previously announced authorization and fraud-related dispute changes will not be implemented.


Merchant support considerations

Effective April 18, 2020, merchants have the option to initiate a refund transaction authorization request. Merchants who choose to initiate refund transaction authorization requests should be aware of the recommendations below.

  • Merchants are strongly recommended to have a return policy that limits the time frame for processing a refund to no more than six months after the date of the original purchase, unless applicable law or regulation specifies a longer time frame.
  • In a card-present environment, merchants should ask the cardholder for the transaction receipt from the original purchase, identifying a truncated primary account number (PAN) for the payment card used, in order to ensure that the refund is submitted to that card. (If a non-card payment device such as a contactless-enabled mobile phone was used for the purchase, the truncated PAN on the receipt may represent a device token that differs from the PAN on a physical card linked to the same account.)
  • Merchants should initiate the authorization request before providing a refund transaction receipt to the cardholder.
  • Merchants should be aware that an issuer may have a valid business reason to decline a refund transaction authorization request (for example, the card account is closed).

If a refund transaction authorization request is declined by the issuer or the card used to make the original purchase is unavailable, the merchant should refer to company policy to manage the purchase return, cancellation of services, or price adjustment. The policy may include providing a refund in the form of cash, a check, or a prepaid card. A merchant should document any alternative form of price adjustment given, so that the acquirer may respond with a valid second presentment in the event a message reason code 4860 (Credit Not Processed) dispute is received.

Correcting a refund transaction processing error

A merchant may initiate a refund transaction reversal only when the acquirer host system is unable to communicate an authorization response to the merchant's terminal, or to correct a documented clerical error, such as the erroneous capture of transaction data, a duplicate transaction, or an error caused by the transposition of data. Refund transaction reversals must be sent within one day of the date on which the acquirer sends the First Presentment/1240 clearing message, unless the issuer is contacted and agrees to a longer time frame.


The following dispute-related changes apply to refund transactions occurring on or after April 18, 2020:

  • An acquirer may use a Credit Previously Issued second presentment to remedy a message reason code 4853 (Cardholder Dispute) dispute, by providing compelling evidence that the merchant credited the cardholder by means such as cash, a check, a prepaid card, or an in-store credit.
  • An issuer may initiate a message reason code 4842 (Late Presentment) dispute if the issuer has received a refund transaction presentment after the presentment time frame has expired and is unable to post it because the account is closed. The presentment time frame for a refund transaction is five days, with the refund transaction date as day zero.

A message reason code 4860 (Credit Not Processed) dispute right continues to be available to issuers if a merchant has agreed to provide a refund to a cardholder and at least 15 calendar days later, a refund transaction has not been submitted.

Did you find it helpful? Yes No

Send feedback
Sorry we couldn't be helpful. Help us improve this article with your feedback.