A chargeback from your credit card issuer gives you a refund when the retailer won’t. Here’s how to navigate the sometimes confusing chargeback rules.
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That’s where credit card chargebacks come in. A chargeback from your credit card issuer gives you a refund when you’ve been wronged in a transaction and the retailer won’t give you back your money.
Assuming you first try to resolve the problem by going directly to the merchant, the following are all relevant reasons for chargebacks:
- You didn’t receive an item ordered,
- You feel a product or service is substandard or not how it was represented,
- You were incorrectly billed or
- You don’t recognize a charge on your credit card statement.
Your rights when seeking redress for unfair charges are outlined in the federal Truth in Lending Act and one of its subsections, the Fair Credit Billing Act. “If you follow the guidelines outlined under Truth in Lending, the dispute process works most of the time,” says Linda Sherry, director of national priorities for Consumer Action. “But there are certain guidelines that can confuse people.”
It helps to understand that there are two categories of disputes: billing errors and “claims and defenses.” Your rights are different under each. Most complaints can be settled using the process for billing errors; claims and defenses is something of a last resort.
Here’s how to navigate the chargeback process:
1. Start at the source, then escalate
Often, an unauthorized or disputed charge can be resolved quickest by contacting the seller. Most merchants will work with you to issue a refund, but sometimes they won’t. Or, they may have gone out of business or you may have been a victim of fraud.
In those cases, you’ll want to contact your card issuer. Some issuers require you to file a dispute in writing, but the easiest way to start the process is to call the customer service number on the back of your credit card. With Capital One, for instance, no form is required — a phone call will suffice. “If the issue isn’t resolved with the merchant, then the customer should call us and file a dispute,” says Amanda Landers, spokeswoman at Capital One.
Provide proof to back up your claims. Emails to the seller, ads for the item in question or proof that it was returned are all helpful forms of evidence. You may need to provide copies of them to the credit card issuer.
Before you call, you might also want to check your records for any rights you may have unintentionally signed away. For example, if you’re disputing work done on your home, check the contract you signed. Contractors will sometimes throw in a clause protecting them from credit card disputes. You may still be able to beat this, but it will make it harder.
Once you’ve presented your case to the issuer, it will contact the merchant. “We get the merchant’s side of the story and either come back to you and say we can give you the chargeback and return the money to the credit card, or we cannot based on what the investigation found,” says Landers.
Note that you don’t have to pay the disputed charge while it’s investigated, and you can’t be required to pay interest or other fees on the disputed amount during the investigation. If you do pay the charge you’re disputing, though, you can still have the money refunded through the chargeback process as long as you’re following the rules for billing errors.
2. Act promptly
A billing error has to be posted to your statement for you to dispute it, but you can report a suspicious charge as soon as you notice it. Under the FCBA, you should send a letter to the creditor within 60 days after the bill with the error was mailed to you. “I would say get your complaint in as fast as possible,” says Sherry.
That said, if you do only notice a billing error after a few months, you may have some leeway. “With the Visa and MasterCard guidelines, issues really need to be flagged within 120 days in order to preserve the customer’s chargeback rights,” says Landers. “However, we always encourage customers to give us a call or go online and reach out no matter how long it’s been since the transaction.”
Issuers usually post guidelines for the dispute process on their websites. Discover’s Dispute a Charge page, for example, states cardholders have 120 days from the transaction date to open a dispute online. For disputes beyond 120 days, they offer a phone number.
3. If it’s fraud, stress that
If you have reason to believe a charge was made fraudulently, your case will receive special attention so make that clear upfront. “Say, ‘This is fraud, unauthorized use, and I want you to fix it,’ and keep saying that,” Sherry says.
In most cases, drastic measures won’t be necessary. In fact, you’ll probably hear about a fraudulent use of your card from the issuer before you even notice it. “They’re all over that stuff now,” Sherry says. “They’re monitoring accounts and trying to figure out if something is an atypical transaction for you, but everything’s open to the weird, ‘black swan’ exception. Sometimes consumers have to be ready to see it through to the end.”
4. Don’t give up too easily
If a merchant refuses to refund your money, your issuer may turn it back to you. If you believe the merchant is wrong and your complaint is valid, don’t take no for an answer.
“A lot of people just give it up,” Sherry says. “The issuer may come back to you and say, ‘The merchant said X, we can’t give you the chargeback.’ But that’s not a time to give up, that’s the time to get your dukes up and go in for another round because the merchant may be saying something that’s false. Any proof you can bring to bear at that point will help.”
5. File under ‘claims and defenses’
If the standard dispute process fails, you have another chance — filing a complaint under “claims and defenses,” a process instituted by the Federal Trade Commission in 1975. Unlike billing errors, claims and defenses can be filed up to one year from the time of purchase. However, they must meet these four criteria:
- The amount in dispute is more than $50;
- You must not have paid the disputed charge;
- You must make a good-faith effort to get a refund from the merchant, and;
- The merchant must be within 100 miles of your home and within your state (this requirement is waived for online purchases).
When you contact your card issuer after their billing errors deadline (whether that’s 60 or 120 days), make sure you state that you’re using your claims and defenses rights. In most cases, you won’t need to go this route. “If you’re a good customer and they don’t want to lose you, the issuers are going to try their best to help you,” Sherry says. “It can be confusing for consumers, but it’s good to know about because if you don’t get satisfaction, there is this secondary mechanism for getting a chargeback.”
6. Look into state laws
If you get nowhere with your dispute, you may want to look into the laws governing your state. “Certain states have different laws and most are better than the federal law,” Sherry says. “They may give you more time or, depending on the state, perhaps additional protections. But Truth in Lending dispute rights for billing errors is a very strong consumer protection.”