Thanks to online shopping, practically anything you could ever want is as close as your personal device from which you can make an order. Advertisers all over the world are fighting for your attention and you seemingly have almost limitless choices.
What to do if you are not satisfied with your purchase? Perhaps you did not receive something you ordered? Or you notice an unauthorized charge on your card? Should you initiate a credit card chargeback in every case?
The short answer to that is “NO”. Cardholders should always dispute a transaction first by contacting the merchant. Unless the merchant is not responding to your calls or emails, don’t do a chargeback.
What consumers often don’t understand is that filing an illegitimate chargeback is almost the equivalent of cyber-shoplifting. Merchants are billed for any fees generated during the chargeback and could also get their bank accounts frozen.
For what? Because a customer did not receive an item? And the item was shipped, however was lost in transit? The fact that you did not receive an item, might not be the merchant’s fault. A chargeback should only be used when you suspect fraud and after you tried to solve the issue directly with the merchant. Businesses get hit hard every time a buyer files a chargeback.
There are of course very justified reasons for requesting a chargeback. If used correctly, chargebacks are a critical level of protection for consumers. Credit and debit card companies offer chargebacks at their own discretion. Card issuing banks are not entitled to rule a case in your favor. Reading this guide will increase your chances of winning a legitimate case.
- What is a Credit Card Chargeback?
- When to Initiate a Chargeback
- The Chargeback Process
- The Effects of Chargebacks
- Use Chargeback as the Last Resort
What is a Credit Card Chargeback?
With a chargeback, you can dispute and reverse a credit card transaction and get your money back. Instead of requesting a refund from the merchant who arranged the purchase, cardholders can dispute a transaction by contacting their bank directly and request a chargeback.
The ability to dispute a payment is intended to protect consumers from unauthorized transactions, but it can be a major headache for businesses, especially if it has been issued in error. When a chargeback occurs, the disputed funds are held back from the company until the card issuer finds a solution and decides what to do:
- If the bank decides against you, these funds will be returned to the merchant.
- If the bank decides in your favor, the disputed funds will be returned to you.
NOTE: If you have been purchasing through unsafe online shops or fallen for phishing scams your credit card numbers and secure personal information related to it, could have been stolen. If you suspect fraud, call your card issuing bank and cancel your card immediately.
When to Initiate a Chargeback
Good Reasons to Initiate a Chargeback
Chargebacks are annoying for all parties involved. A case can drag on for several months, as the merchant has the right to challenge your accusation.
Therefore, filing a chargeback should always be the absolute last resort. Only contact the bank if you have no other options. In these following cases you are encouraged to initiate a chargeback:
- You have found an authorized transaction: This usually happens when someone steals your credit card information. Contact your bank immediately.
- When purchasing through unsafe online websites and have a justified reason to believe your identity might have been stolen. Or when you suspect you were victim of a bank phishing scam. Contact your bank immediately as well.
- After canceling a subscription you have been charged a recurring fee again: Many services are recurring subscription services that charge you a monthly fee. If you cancel the service, but the company refuses to honor the cancellation and continues to charge you fees, you should initiate a chargeback to stop it.
- The goods you have received were defective or not as described: If you buy something online and the item you received was damaged during shipping, did not match the description, is fake or generally of poor quality, you can arrange a refund.
- You have not received any services or goods: Chargebacks can save you if you order something online and the merchant never delivers and refuses to refund you.
- You have been charged twice for the same item: If you see duplicate transactions on your card and the merchant should only have charged you once, you can initiate a chargeback to get rid of the double charges.
- You have not been credited for a return: If you return an item and the merchant does not credit your card back within a reasonable period of time, you can initiate a chargeback to receive your money.
- You have been charged the wrong amount: If you see a charge that doesn’t match what you agreed to pay, you can reverse that charge to correct the problem.
These chargeback reasons apply only if the company refuses to open a dialogue with you and solve the issue directly. You usually have about 120 days to initiate a chargeback. The time limits will vary a bit depending on your bank and the type of chargeback.
Such crimes, as described above, can be widespread and so largescale that at times they make it to the headlines. This led many people to believe that a credit card is an unsafe method of payment, however, the option of a chargeback makes credit and debit cards one of the safest options.
Incorrect Use of Chargebacks
Because the system was originally designed for offline payments and today’s online consumers, there are loopholes that allow chargebacks to be used intentionally for unwarranted reasons. Examples include:
- Buyer’s remorse sets in: This occurs when you regret a purchase and you now want to return the goods or cancel the service. Instead of contacting your merchant, you file for a chargeback. Also remember that if you keep the goods without the explicit permission of the merchant and also receive a refund, it is not a refund: it is theft and a criminal offense.
- You don’t remember making the purchase: It’s easy to forget a particular transaction, especially if you make many purchases in a short time. But again, if there is any doubt about a transaction, it is important to contact the merchant directly. A telephone number or e-mail address should appear on your credit card statement. A quick inquiry will tell you everything you need to know.
- It seems easier to contact the bank: Very few people enjoy dealing with the customer service of a company. If submitting a chargeback seems faster and easier, it might be tempting to try it. In reality, however, legit companies will usually want to maintain your business and loyalty by doing everything they can to resolve the problem quickly and to your satisfaction.
- A family member has used your card: A member of your household might have used your card without your awareness. When you found out, you should not call the bank and say that it was an unauthorized purchase. This does not count as an unauthorized purchase.
- You are confused about refund options: Some unlawful chargebacks are just the result of a misunderstanding. You call the bank to just get an explanation, but the bank may think you want to arrange a chargeback. This is another reason why you should always contact the merchant first.
The Chargeback Process
Does the company not respond to you or refuse to refund your payment? If you run into an impasse with the company you bought from, you can and should start the chargeback procedure.
What Is The Chargeback Time Limit?
The rules laid down by card issuers usually give you 120 days to make a claim. The clock starts ticking from the date of payment, although the timeframe depends on the claim-back reason. Here are some examples:
- Broken goods: You buy a kayak and two weeks later you put it in the lake, just to find out that it is defective and leaking – and the dealer does not help with sorting. The period starts from the date you bought it.
- Failed delivery: A delivery date for your ordered goods is not met, the article never arrives and calls for complaints to the company remain unanswered. The period begins with the date of the missed delivery.
- Bankrupt company: You book a flight or a trip with a company that then goes bankrupt before you take it. The period starts from the date on which the flight was supposed to depart or the holiday was supposed to start.
How To File A Chargeback
The exact procedure to initiate a chargeback depends on your credit card company. If in doubt, you can call the number on the back of your credit card and inform your bank’s customer service department that you wish to initiate a chargeback or dispute a charge. They will guide you through the process.
Depending on your bank, you may be able to initiate a chargeback completely online. There might even be a “dispute” button next to each purchase on your credit card company’s website.
When you submit a chargeback, prepare yourself with an exact explanation why you’re doing the chargeback and what went wrong. Provide as many details as possible. Acquire all details you have about the transaction in question. This may include invoices, emails, credit card statements and any other related papers.
If you never received a product, say so. If it was damaged or counterfeit, say so. Tell the credit card company if you tried to contact the company customer service and explain why they were not helpful enough.
For example, if you contacted company customer service three weeks ago and they didn’t respond or turned you away, it’s good to disclose this.
How the Chargeback Process Works
To initiate a chargeback, contact your credit card issuer and file a dispute. They will point out the transaction you are contesting and state the reason for your dispute. This is how the process usually unfolds:
- Step 1: First, a purchase is carried out. All chargebacks begin after a particular customer made a purchase either face-to-face or online.
- Step 2: The customer initiates the chargeback. After the customer reviews their credit card statement at the end of the month, they may notice a charge that they have not authorized. The customer then contacts their credit card company and asks them to investigate the charge in question.
- Step 3: As soon as a customer initiates the chargeback process, the customer’s bank contacts the merchant’s bank and asks it to provide evidence to refute the claim. This can be things like invoices, receipts, proof of delivery or anything else the merchant needs to prove that the purchase was valid.
- Step 4: Decision time. After reviewing all evidence provided by the merchant’s bank, the cardholder’s bank must decide whether or not the purchase was valid. Here we see the importance of providing as much detail as possible.
- Step 5: At this point, the customer is informed about the decision. Depending on the evidence provided by the acquiring bank, you must either pay for the goods or continue to contest the purchase and initiate a procedure known as arbitration. If the acquiring bank determines that the purchase was indeed not valid, the cardholder receives a refund for the transaction.
- Step 6: Arbitration. If the issuing bank and the merchant bank cannot reach an agreement, as a last resort they enter into what is known as arbitration. The arbitration process is regulated by the issuing credit card company, and its decision is absolutely final.
NOTE: It is important to understand that even after you have received a refund from a chargeback, it can still technically be withdrawn from your account. This may be the case if the company from which you bought successfully contests your claim within a limited period of time.
How Long Does It Take to Receive a Refund?
There is no specific time frame when it comes to getting your money back. Once you have requested a chargeback, it is up to your card provider to contact the provider’s bank and to process your refund request. The whole proceedure could be lengthy.
The Effects of Chargebacks
Both consumers and retailers may ultimately pay the price of chargebacks. The possible negative effects of any chargeback include:
- Having to deal with many chargebacks can result in increased costs for the products. Merchants are forced to increase their prices, which means that you pay more for goods.
- There is a possibility that the chargeback may be reversed if you do not provide sufficient evidence. You will be charged a second time for the original transaction and the bank may even charge you an administration fee.
- If the bank suspects that you are making unlawful chargebacks as a means of cyber shoplifting, they may decide to close your account. Your creditworthiness may also drop, making it more difficult to obtain additional funds.
- The merchant must pay expensive, non-refundable fees for each chargeback. Even if you later discover that the chargeback was submitted in error, the loss has already been incurred.
- If a company receives too many chargebacks, the bank revokes the merchant’s ability to process credit card payments. Once this happens, a business will be required to find an alternative or even be forced to close. Fake chargeback actions could be directly responsible for the destruction of a legitimate business.
- Given the negative implications, some businesses have a zero-tolerance policy against chargebacks. If a service user files a chargeback, the company terminates the account, permanently bans the user and will not allow you to buy ever again.
Use Chargeback as the Last Resort
As a cardholder, you are responsible for ensuring that your account is used ethically and honestly. If you do not recognize a charge to your account, do not automatically assume credit card fraud. First, contact any household members who may have access to the card and ask them if they have authorized the card without your knowledge.
Read the terms and conditions carefully before you buy anything. Do not buy if you do not agree with the guidelines. Before you request a chargeback, check again what you originally agreed to. Consider the possibility that you simply have forgotten what you have purchased.
Cancel your subscriptions long before the next billing cycle begins. Give the merchant enough time to cancel your contract. The process could take a while, so it is in many cases unreasonable to expect you will avoid the fee if you called just a day before.
Above all, contact the merchant in question to verify the purchase and give a sufficient amount of time to initiate a refund before assuming fraud. The merchant’s account may not have sufficient funds to cover the chargeback at the moment and therefor a debit may not be possible until the account is recharged.
If your bank does not approve your request and you believe that you have provided all the required evidence, you can still make a complaint with the State Attorney General’s Office.