One of the most powerful defenses consumers have against fraud and unauthorized transactions is a chargeback, a reversed payment through your credit card company.
And data shows people are increasingly using this defense, as the number of chargebacks has increased since the start of the pandemic. Maybe you had to cancel a nonrefundable trip early last year, or disputed charges related to concert tickets for a show that was canceled or postponed indefinitely. Similarly, maybe you disputed the cost of an online order you never received due to supply chain issues or ongoing USPS delays.
While you may be more likely to receive a refund or chargeback in some of these cases over others, disputing a credit card transaction with your issuer is a useful protection against fraud and payment mishaps. But it’s important to understand the right time to make a claim, and how the process works before you initiate the chargeback process. Here’s what you need to know:
What Are Chargebacks?
A chargeback is money returned to you after you dispute a charge. They’re most commonly associated with credit card transactions, but can also be issued for debit card transactions.
Here are some situations in which you may dispute a charge and should initiate a chargeback:
- Unauthorized charges on your account
- Duplicate charges
- Charges that are larger than the cost of what you bought
- Charges for items or services you never received
- Charges for damaged or defective items
A chargeback comes from your card issuer. If you dispute a charge with the merchant and get the funds back that way, that’s technically a refund.
On either end, the process to receive any funds back must be initiated by you reporting the mischarge. That’s why it’s important to regularly check your debit and credit card statements to make sure nothing is awry. A mischarge could include things like charges from retailers you never shopped at; extra, duplicate, or too-large charges from retailers that you have shopped with; or a charge for an item that you never received.
How to Request a Chargeback
In most cases, you should begin the resolution process with the merchant first, unless you think your account may have been exposed to fraud and you want to notify your issuer. Look into the business’ return policy to see if you’re eligible for a refund. You may need to revisit the merchant in-store with a receipt or reach out to a customer service representative online.
If the merchant won’t issue you a refund, you can initiate a dispute with your card issuer. Call your issuer and speak with a representative. You may also be able to initiate the chargeback through your online account or within your issuer’s mobile app.
Request your chargeback within 60 days of the first bill error. Your creditor must resolve the dispute within two billing cycles of receiving your request, according to the Fair Credit Billing Act.
If you’re disputing a duplicate or too-large charge, then you may need to provide proof of what you actually did purchase, like a receipt.
It takes time to resolve a dispute and get a chargeback in your account once settled. Depending on your issuer and situation, you might need to file forms, submit documentation, or go through other processes.
When Can Consumers Legally Use Chargebacks?
Consumers have the right to dispute any of the following billing errors, according to the Federal Trade Commission:
- Unauthorized charges — federal law limits your responsibility for unauthorized charges to $50
- Charges that list the wrong date or amount
- Charges for goods and services you didn’t accept or that weren’t delivered as agreed
- Math errors
- Failure to post payments and other credits, like returns
- Failure to send bills to your current address — assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends
- Charges for which you request an explanation or written proof of purchase, along with a claimed error or request for clarification
The FTC recommends filing your request for a chargeback within 60 days after the first bill error. After that, it can take up to two billing cycles or 90 days to resolve.
If you’ve already paid the statement balance on which the disputed charge appears, you can still receive the chargeback, according to the Consumer Financial Protection Bureau. But instead of a quick return, you may have to wait until the dispute is resolved and your issuer decides you’re owed the money before you receive it.
Potential Consequences of Chargebacks
It’s best practice to request a refund with the merchant before disputing a purchase with your card issuer.
Businesses can dispute a chargeback request if they feel a customer should not be refunded. If the merchant disputes your claim, you could still be liable for the charge. And initiating a chargeback for your own mistakes — such as misunderstanding a merchant’s return policy or regretting a purchase — is its own form of fraud, known as “friendly fraud.”
Most often, the consequences of chargebacks fall on the seller. If your chargeback is approved, the amount is recovered from the business’s account once the claims are settled. Chargebacks are costly for businesses; beyond the charge itself, disputes take time and money to resolve, and they may take on chargeback fees and lose inventory. But they can also cost businesses their reputation. If a merchant refuses to work with you to resolve an issue, you may be less likely to shop with them again in the future.