Understanding Discover Chargeback Reason Code UA05: Fraud: Chip Card Counterfeit Transaction

Discover chargeback reason code UA05 applies to card-present sales where a counterfeit chip card was used, or a chip card was processed by swipe instead of chip at a non‑EMV compliant terminal. To contest the chargeback, merchants must demonstrate that they used EMV or a fallback correctly. 

Key Takeaways

• What it means: A chip card purchase was processed without proper EMV chip use.
• Causes: Non‑EMV terminals. Swiping chip cards. Missing chip data.
• How to respond: Supply comprehensive evidence that you used EMV/fallbacks correctly.  
• How to prevent: Use EMV-certified devices. Maintain accurate configuration and transaction records.

What is a Discover Reason Code UA05 Chargeback?

Reason code UA05 sits in Discover's Fraud category. It applies when a card-present purchase is disputed and the record shows a chip‑enabled card was not processed using the chip, or the terminal did not handle the chip data correctly. 

Often, the cardholder disputes the transaction because they were not present at the time of purchase. Plus, they still have their card, so they can only assume it must have been carried out with a counterfeit copy. If the network data indicates that a chip-enabled card was processed as a swipe or other fallback, or used in a non-EMV-compliant terminal, issuers may proceed directly to a UA05 chargeback without a retrieval request. Note that issuers should not use reason code UA05 in the following scenarios:

• The transaction was a genuine and flagged fallback.
• The transaction was keyed.
• The sale was card‑not‑present.
• It concerns a cash advance at an ATM.
• The terminal was EMV‑capable and processed the chip correctly.

Primary Causes for a Code UA05 Chargeback

The main cause of these disputes is a chip card that is not processed through the chip reader. Fraudsters often copy data from magnetic stripes and write it onto a blank card. This clone can pass a swipe transaction at merchants who have not upgraded to EMV or who allow swipes on chip cards. Because the chip’s dynamic data is missing, the issuer can identify the downgrade and file UA05 when the genuine cardholder reports the fraud.

Another cause is a terminal that is technically EMV‑capable but misconfigured. If the device fails to transmit the full chip data set, the authorisation message may look like a magstripe transaction. That can also trigger UA05. Staff workarounds can make things worse. When a chip reader is slow or fails on the first attempt, a cashier may switch to swipe or key entry to finish the sale. Without proper fallback flags in the authorisation, the issuer sees a preventable downgrade, increasing the risk of a counterfeit claim.

Friendly fraud can also appear. A customer might insist on a swipe because “the chip is broken,” then later dispute the charge. If your records show a chip card was swiped at a non‑EMV terminal, your position is weak. Across all scenarios, the pattern is the same: missing or mishandled EMV chip data leaves the transaction exposed to UA05.

Time Limit for Disputing a Discover Reason Code UA05 Chargeback

There is a firm time limit to reply. The acquirer or merchant has 30 days to respond to a UA05 chargeback. The countdown starts on the date the chargeback is issued. Some acquirers set shorter internal deadlines to allow time for review, so act as soon as you receive the notice. Late replies are usually rejected, even if you later find strong documents. 

To avoid this, many merchants implement dedicated chargeback response processes. A named person in the business (or team) is responsible for checking for new chargeback notices daily and managing the process of evidence gathering. A simple internal checklist for UA05 helps avoid mistakes and keeps you within the time limit. This helps ensure comprehensive, consistent responses which are more likely to achieve a positive outcome. Submit everything through your acquirer’s channel and keep a record of what you sent and when. 

What UA05 Means for Consumers & Issuers

For consumers, UA05 addresses fraudulent card‑present purchases made with a counterfeit version of their card. Cardholders expect chip transactions to be handled with the added security of EMV. If a charge appears and they still possess their card, they may report it as fraud. UA05 provides issuers with a framework to review terminal data and determine if the merchant has processed the card correctly. If the chip was not used where it should have been, the consumer is likely to be refunded.

For issuers, UA05 is a data‑driven judgement. They examine the authorisation message and clearing data to check for chip usage, the presence of EMV tags, and any CVM results. They also look for fallback flags. If the data suggests a magstripe or downgraded path on a chip card without a valid reason, and the cardholder denies the purchase, UA05 is appropriate. UA05 should not be used when the terminal processed the chip correctly, when the transaction was a flagged fallback, or when it was clearly card‑not‑present, keyed, or an ATM cash advance.

Issuers can file UA05 without a retrieval request, but they may still request documents if needed. Clear merchant records (receipts, EMV logs, and configuration reports) help issuers make a faster and fairer call for both consumers and merchants.

What UA05 Means for Merchants

Receiving a UA05 chargeback indicates a potential issue with EMV compliance and processing. It's a serious issue. A single downgraded transaction can result in lost funds, fees, and goods, as well as time spent on administrative tasks. Repeated cases harm your standing with your acquirer. The pattern behind most UA05 losses is avoidable: the chip was present, but the sale did not use it, or the terminal did not transmit the correct chip data.

The fix lies in equipment and routine. All active tills should be EMV‑certified and PIN‑capable where required. The chip reader should be the default path for chip cards. Staff should attempt a chip read, retry if needed, and only use fallback when the authorisation message will carry the fallback indicator. If a reader is unreliable, remove it from service until fixed. Avoid manual key entry for card‑present sales unless there is no safe alternative, and record the reason.

Documentation matters. Keep terminal configuration records, EMV certificates, and POS logs that confirm chip usage and CVM results on the day of sale. These records can turn a UA05 claim into a reversal when you can show proper processing. Train your team to treat “please swipe” or “chip is broken” as red flags and to follow prompts instead of taking shortcuts.

How to Respond to a Code UA05 Chargeback

If you choose to fight a UA05, act within the time limit and submit clear, targeted evidence. Start with proof of EMV capability: terminal model, configuration reports, and records showing the device supports contact chip transactions. Add POS logs that show a chip read took place, if that is the case.

If the sale fell back to magnetic stripe due to a chip error, include the authorisation response with the fallback indicator. Explain briefly why the fallback was used and confirm that the staff followed the procedure. If the transaction was keyed or card-not-present, show order records, delivery information, and any AVS/CVV checks to demonstrate the sale did not require a chip read.

Another valid response to this type of chargeback is to argue that the UA05 reason code doesn't apply to the transaction. For example, if you have evidence that the purchase was card-not-present, or it was an ATM cash advance. Whatever your argument, ensure that it is backed up by comprehensive evidence, clearly labelled to make the reviewer's task more manageable. And ensure that you submit everything through the portal in good time to avoid missing the deadline by a few days or hours.

Proactive Prevention: The Ultimate Defence

The best defence is to remove the opportunity for counterfeit cards at your counter. Use EMV everywhere you accept cards. If you operate mobile, pop-up, or satellite tills, use readers that support both contact chip and contactless transactions. Do not fall back to swipe for chip cards unless the terminal prompts you after a genuine failure. Repeated attempts that fail should result in trying another terminal, not a manual override.

You can also try out Chargeback.io to get near-real-time notifications of incoming chargebacks as they are raised. This gives you more time to prepare a response if you wish to contest the dispute.