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What happens if you report a legitimate card transaction as fraud?

If you disputed a charge by mistake, contact your issuer right away to explain the error

Summary

If you mistakenly report a legitimate credit card transaction as fraudulent – perhaps because you forgot you made the purchase or you didn’t recognize the merchant’s name on your statement – just contact your issuer and explain the error.

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As a credit card holder, you have the right to dispute any transaction you don’t recognize. If you spot one, you must follow up with your issuer without delay.

A reader recently sent in a question about a credit card transaction she had mistakenly reported as fraudulent. She’s now a bit worried about what’s going to happen.

Sometimes credit card users forget about transactions, maybe because they haven’t checked their statements in a while, and don’t recognize a charge when they do get around to it. Or, it could be that the consumer’s statement lists a merchant whose name she doesn’t recognize, such as a vendor that the merchant the buyer actually did business with uses.

In these cases, the merchant could choose not to challenge the card chargeback, and simply accept it as a cost of doing business. The merchant could also decide to challenge the chargeback, if they are confident they can prove the legitimacy of the charge.

Martin Lynch, director of education at Cambridge Credit Counseling, says if it’s the latter scenario, the consumer will owe the transaction amount, and possibly other additional fees as well.

See related:  Chargebacks and how to dispute a credit card purchase

Check out all the answers from our credit card experts.

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Observe the golden rule

Lynch says the best course is for the cardholder to follow the golden rule.

“She should contact the creditor, explain the mistake and indicate that she’s ready to pay for the legitimate charges,” Lynch said. “If she were the merchant, wouldn’t she want her customers to be honest?”

Lynch adds there are some charges that can be canceled within a few days of execution, such as gym memberships, and some door-to-door sales transactions.

“The list of these varies from state to state, as accommodations for buyer’s remorse are included in statutory law for very good reasons,” he says.

It might also be that a friend or family member the cardholder had authorized actually made the transaction that was charged to the card. She then wouldn’t recognize this charge if they failed to keep her posted about the transaction. In this case, she would still be responsible for the ensuing transaction, and will have to pay for it, Lynch says, and possibly any additional fees.

Sarah Grano, a representative for the American Bankers Association notes, “Before you claim a transaction on your credit card as fraudulent, take some time to be sure.”

This means you should talk to others who may have access to your card, and be clear about who the merchant is.

“If you claim a transaction as fraudulent then realize it’s not, call your credit card company and the merchant to let them know, and they’ll help you work it out,” she advises.

See related:  Can you get overpayment back if you paid card balance in full by mistake?

Don’t wait to follow up with the card issuer

In any event, if you see any charges on your card statement you do not recognize, call up the issuer without delay.

Chi Chi Wu, an attorney with the National Consumer Law Center, pointed out that under the Fair Credit Billing Act, a consumer has the right to seek clarification of a transaction.

“So if the consumer sees a transaction that she does not recognize, she has the right to ask for more information,” she advises.

After talking with a representative, you may recall making the purchase yourself. Or, it could confirm your suspicion that it is a fraudulent charge. Also, read your monthly statements regularly, without putting the task off for more than a day or two.

To avoid reporting legitimate transactions as fraudulent activity in the future, keep thorough records and review your monthly statements as they become available. And in case you have to let a friend or family member to use your card, ask them for receipts, and watch your next few statements carefully.

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