Credit Cards

Your Secret Credit Weapon: The Chargeback

Comments 10 Comments

Credit cards provide great protection against fraudulent charges, and some can even bag you great cash-back rewards. But perhaps the best thing about paying for your purchases with a credit card is that in the event of a dispute with a merchant, it provides the ultimate ace up your sleeve: the chargeback.

If you didn’t receive the goods you ordered or you feel otherwise wronged by the transaction, a chargeback gives you a refund when the retailer won’t. The issuer will investigate your claim against the merchant and, if it finds it meritorious, will remove the funds from the merchant’s account and put it in yours. Think of your issuer as your tough older brother, setting things right against the bully that’s been stealing your lunch money.

Of course, that doesn’t mean you can (or should) go disputing charge in pursuit of a chargeback anytime a retailer does you wrong. If a product proves defective or never arrives on your doorstep, your first stop should be traditional channels – that is, the retailer’s customer service desk or phone number. It’s only when the merchant doesn’t make with the refund that you should bring in the big guns and call up the issuing bank. (Your issuer should have clear instructions for formally disputing a charge, with options including a phone call, written letter or online form.)

And before you do so, note that not every situation qualifies for a chargeback. The Fair Credit Billing Act, the federal law that dictates how credit card fraud and billing disputes are handled, defines a number of situations as billing errors, including “goods or services not accepted by the obligor or his designee or not delivered to the obligor or his designee in accordance with the agreement made at the time of a transaction.” In other words, if you order a product and it never arrives – or if you refuse delivery because it’s not the product you expected or because it’s damaged – you’re entitled to your money back.

By contrast, simply disliking the product you received isn’t grounds for a chargeback – as the National Consumer Law Center notes in its guide to credit card rights, “You cannot raise a complaint about the quality of merchandise or services you bought with a credit card in the form of a billing dispute.” While being disappointed with the quality of your new toy will usually be covered under the retailer’s return policy, it’s not grounds for getting your bank involved.

So long as the issuer is in compliance with federal law, it’s free to set its own procedures for how to handle these disputes. Take, for instance, the timeframe in which cardholders must contact their issuers, which is set by the FCBA at a minimum of 60 days. A spokesperson for MasterCard says that the issuing financial institutions in its network have discretion to offer a longer timeframe as they see fit, and that most of them offer a 120-day window to dispute a charge. The spokesperson also says that the bank can ask for documentation to support the cardholder’s claim, including “sales slips, contracts, invoices and other types of documentation that will help the issuer fully inform the merchant about the nature of the dispute in non-fraud disputes.” So don’t dispute a charge unless you have some evidence to back up your claim.

Finally, it’s worth noting that banks may go above and beyond the general dispute resolution guidelines set by the issuing network. A spokesman for Chase, for instance, explains that “in cases where Chase is not able to process a chargeback from a merchant, we may, on occasion, provide a courtesy credit to our customers,” at a loss for the bank.

All of this makes chargebacks a potent tool in the consumer’s arsenal, to the point that the mere threat of going to your bank and requesting a chargeback may be enough to resolve the dispute in your favor. But if the retailer still doesn’t blink, don’t hesitate to follow through and take advantage of this key consumer protection.

Image: g4ll4is, via Flickr

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  • Gerri Detweiler

    Matt –

    Great piece and good advice for consumers. I would add a couple of thoughts from my experiences helping consumers.

    1. If the dollar amount is at all significant, but your dispute in writing and send it certified mail, return receipt requested. Keep a copy for your records.

    2. While some issuers may give you longer to dispute a charge, the 60-day window is what is offered under federal law, so if there’s a problem make sure you file your dispute promptly. I say that because there are less-than-reputable companies that will sometimes drag their feet on returns or credits in order to allow those 60 days to pass by.

    3. I wouldn’t hold off on filing a dispute just because I didn’t have the documentation. Depending on what the situation is (goods never received, for example) it may be the merchant who has to prove their case – not you.

    Again, great piece and I hope consumers use it to help protect themselves.

  • Pingback: Credit Card Chargebacks: Your Secret Weapon in Merchant Disputes | BestCashBackCreditCardsx.com()

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  • http://www.Credit.com/ Gerri Detweiler

    I am sorry but I am lost – I am not following the explanation. Is the problem that you never got the goods but they reversed the charge??

  • http://www.credit.com/ Credit.com Credit Experts

    MissMandi —
    Sadly, such protections generally do not apply to debit cards. See Credit Cards Vs. Debit Cards: What’s Safer?

  • http://www.Credit.com/ Gerri Detweiler

    Thanks for your perspective. We wrote about that problem in this story: Can You Shoplift Online?

  • Pogo74

    Visa dispute experts – In Jan 2015 I was scammed by a jeweler in Jerusalem who misreprented the quality and value of a pair of earrings and I bought it hook, line, and sinker with my Chase Visa. Upon return to the states I had a local jeweler confirm my suspicions that I was scammed and initiated a charge dispute with Chase. I had no expectations that this would be approved, but I figured it was worth a shot. A month later I check my account activity and see that they applied an adjustment to reverse the charge 2 days ago. Chase never even asked me for supporting documentaion. The online dispute record does not indicate dispute status and I received no correspondance from Chase, but it still gives me the option to cancel the dispute. My question is, does the adjustment mean the dispute is permanently resolved in my favor or could it be a temporary adjustment while the dispute is still pending? The obvious answer is to call Chase and find out, but my instinct is to let the sleeping dog lie. Thoughts?

    • http://www.credit.com/ Credit.com Credit Experts

      Some card issuers issue a temporary refund while they investigate the consumer’s claims. It would be smart to keep your supporting documentation. You may be asked for it at some point.

  • http://www.credit.com/ Credit.com Credit Experts

    Check your email. We have some questions.

  • Kathy

    I ordered something from Best Buy on 12/8/14 (for Christmas). Item was never received. The tracking information from the Post Office shows it went to the post office, but never went out for delivery. I called Best Buy and was told I could not cancel the item because it was shipped. Told them it was never received and she pulled it up and said yes, it was sent to post office but shows it never went out for delivery. She transferred me to “the back office” and I was disconnected. Tried again; same thing; disconnected. I sent an email stating I never received item and I want a refund (on 12/24/14). Never got a refund. Opened a dispute with my credit card, amount refunded to my card in January. In March, I receive a collection notice for the amount. . . . I have all documentation and am going after them!!!

  • R Reed

    Jan 2015 Citibank charged over $5000 to a local merchant. The merchant didn’t use my name, number, security code or zip code. I called Citibank as soon as I saw the statement and was told they were closing my card, filing a fraud investigation and issuing a new card. I contacted the merchant, who was extremely confused, for the reasons stated above. Fast forward to April 2015 when Citibank STILL won’t remove the charges, and won’t tell me why. Every time I talk to them, it’s “2 to 3 business days”… the merchant has attempted several times to run it thru as a credit to be posted, but Citibank doesn’t accept it. I am at my wits’ end.

    • http://www.Credit.com/ Gerri Detweiler

      The Fair Credit Billing Act is very specific on deadlines for resolving investigations when you allege a billing error. Ideally you should put your dispute in writing (that ensures you are protecting your rights under that law. If you haven’t done so, we recommend you send them a letter by certified mail asap to the address listed on your statement for billing errors. You have 50 days from the date the statement containing the charge was mailed to you to assert a billing error, but there is no time limit for fraudulent charges so even if that time period has elapsed you may want to do so anyway. At the same time, it sounds like it would be a good idea to file a complaint with the Consumer Financial Protection Bureau. They may be able to help you get this resolved.

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