Credit Card Chargebacks: Your Secret Weapon in Merchant Disputes

The Chargeback

By Matt Brownell

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 to 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.

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Maria C Martinez Dia

I have a big problem I have an online store and I have a customer that buy on 5 differents days also cintact me via email and now is doing a charge back because he didn't authorize the transaction please someone who can help

November 19 2013 at 4:07 PM Report abuse rate up rate down Reply

Last, but not least, there ARE a few banks out there (a couple of the LARGEST banks out there) who treat chargebacks like they are a cardholder perk and accept them on anything ... sorry, but those cards aren't going through either ...

November 12 2013 at 5:36 PM Report abuse rate up rate down Reply

P.S. ... whine all you want, but after being burned on a $500.00 or more payment chargeback, no small business owner is going to say "oh, shucks, I can't refuse this gal's visa card just because she's in the bad customer database, that would violate my terms of service" ... they're going to say "oh, shucks, I just can't get your card to go through. Come back and see us when it's fixed, o.k.?" 'smiles'

November 12 2013 at 5:35 PM Report abuse rate up rate down Reply

This is bad advice. The cardholder may get freebies a couple of times, but soon they'll find that no one accepts their plastic. Even small businesses are getting burned by unscrupulous "something for nothing" customers filing bogus chargebacks and "members only" databases are starting to pop up to report and screen cardholders.

November 12 2013 at 5:32 PM Report abuse rate up rate down Reply

So what you are saying is fraudulently advise your bank or credit institution that you did not make a purchase or it wasn't what you ordered instead of actually resolving the issue with the merchant or perhaps performing proper research before making a purchase. Chargebacks where a service has been provided or indeed where the buyer has received the goods but is not happy with either is fraud. Consumers should treat online payments like a regular purchase.

February 19 2013 at 7:13 AM Report abuse rate up rate down Reply

"...anytime a retailer does you wrong". This should read "any time...." Two separate words. Common mistake, but something that should be caught in a publication.

August 01 2012 at 1:02 PM Report abuse rate up rate down Reply

You want some more fairy tails then why don't you try getting your insurance company to pay a claim, like on your home or car when you carry full coverage and they refuse to pay. Sue them like we did. Don't take any low ball offers from insurance companies just sue them then make sure to sue them again in a seperate lawsuit called a bad faith lawsuit for all damages they caused by their fraudulant refusal to pay your claim in te first place. Insurers who loose in court must pay all court cost and attroeny fees plus compensatory damages in all most every state, so its well worth the hassle and it sends a message that wrongly denying claims will not be tollorated.

August 01 2012 at 12:20 PM Report abuse rate up rate down Reply

Wrong it is very difficault to get your money back. To many scammers were lying about not getting their purchases and frankly credit card issuers and banks don't want to mess with it and are lazy.

August 01 2012 at 12:15 PM Report abuse rate up rate down Reply

The problem is if you have a credit/debit card, all in one. Then, invariably, the transaction will accrue to the Debit card--which has no charge-back feature. One solution--get a credit card only from one supplier (e.g., MasterCard) and a separate debit card (e.g., Visa) from your bank.

August 01 2012 at 11:58 AM Report abuse rate up rate down Reply

From the comments I have read, I realize that many people are cheaters and will be unethical with their claims. However, my experience with chargebacks has been very satisfying. When a product is not delivered and efforts are made to find out what the problem is with the merchant and all I get is a difficult process that does not respond to my "where is it?", I will follow through with my credit card issuer. Caution: be prepared to dispute the charge with plenty of documentation to back up your claim. This will facilitate the issuer's job. Thanks for encouraging people to use their right to dispute a charge. Merchants who get burned should not accept cards. Most of the time they build fraud into their prices and that is one reason why everything is so darn expensive. No trust .....

August 01 2012 at 9:17 AM Report abuse rate up rate down Reply