Credit Card Chargeback – Chargebacks Explained

Everything You Need to Know About Credit Card Chargebacks

Have you ever paid for something and you were excited only to find out that the item was poor quality? If so, you know the instant frustration you can feel. There is a way to remedy this situation, and it’s called a credit card chargeback. Most people think this is only for billing errors or fraudulent purchases. However, the Fair Credit Billing Act also allows you to dispute a charge if you’re dissatisfied with the item. You should only do a chargeback as a last resort. This article will walk you through the concept of chargebacks. By the end, you’ll know what a chargeback is, and how to go about this process.

What are chargebacks? Learn if you qualify a credit card chargeback.

What is a Chargeback?

A credit card chargeback is a dispute with a merchant for goods and services. The bank or credit card lender will reverse the transaction to complete the chargeback. If you dispute the charge, you are given a reprieve from paying your balance until it’s resolved. This won’t damage your credit while this process is ongoing either. A borrower is also allowed to dispute charges from previous billing cycles as well.

What Does a Credit Card Chargeback Cost a Lender?

Merchants strongly dislike chargebacks because they cost them a lot of money. Not only will they lose the money from the original sale, but they’ll get charged extra fees too. A single chargeback fee can cost around $100, and this adds up quickly. If a merchant has several chargebacks, the credit card processing company may charge them higher rates. The credit card processor may choose to cut ties with the retailer if they keep getting chargeback requests as well.

Can a Retailer Dispute the Credit Card Chargeback?

A retailer has the option to dispute a chargeback. However, the credit card lenders and banks typically side with the cardholders. Also, a retailer can legally pass any chargeback fees back onto their customers unless the cardholder agreement says otherwise. You will see this by a merchant raising their prices. However, the retailer runs the risk of losing their customers to competitors by doing this.

How Do You Request a Chargeback?

The chargeback process is a complicated one for everyone but the consumer. The consumer simply has to file a dispute with their lender or credit card company. You may also have to submit a written complaint to your bank or card issuer. Usually, all you have to do is call customer service or fill out an online form and submit it. If you’re expecting a refund, you have 60 days from the purchase date to file a dispute.

However, this period does vary from lender to lender, so it is a good idea to ask.You’ll have to contact your credit card issuer directly, or you can visit their website. Here, you’ll find all of the details about disputes and chargebacks for each company. You’ll also have to provide evidence that you deserve a refund. You’ll also have to show that you contacted the lender and it didn’t resolve your issue. Such proof can be an email chain between you and the retailer.

However, most credit card issuers and banks side with the cardholder.You’ll have to contact your credit card issuer directly, or you can visit their website. Here, you’ll find all of the details about disputes and chargebacks for each company. You’ll also have to provide evidence that you deserve a refund. You’ll also have to show that you contacted the lender and it didn’t resolve your issue. Such proof can be an email chain between you and the retailer. However, most credit card issuers and banks side with the cardholder.

Chargebacks – Getting Your Refund

Once you dispute a charge, the bank will contact the retailer to see if the dispute is valid. You will temporarily avoid paying the disputed charge while this is happening. You should be aware that getting a full refund can take months. If your chargeback request is valid, the bank and the retailer will settle it. You may be issued a partial refund until the bank and the retailer settles the credit card chargeback.

What Can Happen If You Abuse This System?

If your lender contacts the retailer and they find out that the dispute is invalid, there are fees. You may have to pay a fee for committing chargeback fraud. This means that you disputed the charge to get a refund, and there was nothing wrong with the product. If your credit card issuer finds out, they can close your account. You should use this system as a last resort only. Also, you should work with the retailer first as many of them are happy to compromise. If you use this system because you just don’t want to return an item, this is considered abuse.

Chargeback Fraud Versus Friendly Fraud

There are two categories of people who file chargebacks and without contacting the retailer first. They are both serious, and they both have consequences attached to them.

  • Chargeback Fraud. Chargeback fraud means you’re deliberately trying to get something for nothing. There is nothing wrong with the goods, and you haven’t contacted the retailer before you file a dispute. You only want a refund because you want a refund. Chargeback fraud is basically the equivalent to online shoplifting, and there is usually malicious intent involved. Retailers can blacklist you for doing this. Your lender may also close your credit card account.
  • Friendly Fraud. Friendly fraud is usually the result of a mistake. There is no malicious intent involved. Retails who have subscription services see this a lot. A person forgets they signed up for something and disputes is when they find it in their statement. Most borrowers don’t read the fine print, and they have no idea what they’re signing up for. A retailer will usually work with the customer to clear up the misunderstanding.

This article has gone over what a credit card chargeback is. We talked about what it can cost a lender, and how you request a dispute. We also talked about getting a refund along with what happens if you abuse the system. Lastly, we discussed the difference between chargeback fraud and friendly fraud. You should now know the differences, and why it is so important to read all of the fine print.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.