Don't be caught off guard by limited purchase protection

By  |  Published: March 27, 2009

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.
Ask Sally a question, or read her previous answers in the To Her Credit archive
Question for the expert

Dear To Her Credit,
I travel a lot, and I've always been very careful to use my Visa card when I buy things in case something goes wrong with my purchase. I've always heard that the credit card companies stand behind you when you have a dispute with the merchant. When you buy something in a town you'll never be in again, that's important.

This morning I noticed on my Visa credit cardholder agreement, which I have through Chase Bank, that my credit card protection is only valid when I have a problem with goods or services that cost more than $50 and are purchased in my home state or within 100 miles of my home address.

I didn't know that! How many people do? Is that standard wording for most credit cards? So anything I buy online or while I'm traveling is not a protected purchase? Apparently, if I buy a $49 handbag and the strap falls off the next day, I'm out of luck, too. I can't believe it!

What's up?  -- Samantha

Answer for the expert

Dear Samantha,
Most of us assume that when we buy things with our credit cards, the credit card companies will be on our side if we have a consumer dispute. However, that's not necessarily the case.

The fine print on the back of my credit card statement says, "Special Rule for Credit Card Purchases: If you have a problem with the quality of goods or services that you purchased with a credit card (excluding purchases made with a check) and you have tried in good faith to correct the problem with the merchant, you may not have to pay the remaining amount due on the goods or services. You have this protection only when the purchase price was more than $50 and the purchase was made in your home state or within 100 miles of your mailing address."

In other words, you might not have consumer protection if:

  • You don't first try to work things out with the merchant.
  • You bought something for less than $50.01.
  • You bought something by telephone or online. (You may be protected if the merchant initiated the phone call.)
  • You were traveling when you made a purchase.

These limits in consumer protection are written into the federal law governing disputes involving a credit card -- the Fair Credit Billing Act

Linda Sherry, Consumer Action's director of national priorities, says the credit card company is only providing the minimum consumer protection required by law. "Some companies go beyond federal law and they will extend protections. If things get too ugly, they can throw down the gauntlet."

Looking at my credit card statement, most of my purchases would fall under one of the categories excluded from consumer protection! So it's a myth that as long as I buy something with my credit card, I can just tell my credit card to cancel the charge and they'll take care of it through a charge-back.

Sherry thinks very few people know about these limitations. "Anybody who tries to dispute something learns about it pretty fast," she says. "I've never been able to answer why they do this."

It's important to distinguish between billing rights and disputes over the quality of goods or services. The two issues fall under different sections of the law and have different rules. If you have a billing dispute -- for example, if they charged you twice for the same thing -- you have 60 days from the time the credit card company sends you the first bill on which it appears. It doesn't matter where the purchase was made or for how much.

Bottom line: Do your own due diligence. Know your credit card company's rules. If you have more than one credit card, read the fine print and decide which card gives you the best protection. If consumer protection is one of the main reasons you use a credit card, make sure you're really covered.

See related: Debit vs. credit: Which offers more protection?, How to dispute a credit card bill with a merchant, Feds propose new right for consumers in credit disputes

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Updated: 10-22-2017

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