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How to Win a Chargeback As a Consumer: 6 Useful Tips For Success

Credit card chargeback is a powerful tool for consumers. But as any other tool - you should know how to use smartly and efectively.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

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Table Of Content

In this chart compiled using Consumer Financial Protection Bureau data, we can see that Capital One had 11.8 complaints per billion dollars charged. This is followed by CitiBank at 10.55. At the other end of the scale, Amex appears to have the fewest complaints at just 1.59 complaints per billion dollars.

 

Key Takeaways

  • Before filing for a chargeback claim it is always a good idea to talk to the merchant. The fact of the matter is that in most cases the merchant company might be willing to issue a full refund or replace the sold product.
  • It is important not to give up too easily when dealing with a dispute. If the merchant keeps refusing to issue a refund, then the next logical step would be to reach out to the credit card company and file for a chargeback.
  • If the chargeback claim is denied, then it might be a good idea to visit the credit card company office and talk to the firm representative.

What Is A Chargeback?

In its simplest definition, a chargeback merely reverses a credit card sales transaction.  The Visa 2016 chargeback management guidelines say that a chargeback “provides an issuer a way to return a disputed transaction.”

It pushes back up the line of the debt for the items the cardholder has purchased:  from the purchaser to his card issuer, to the merchant’s bank, and then back to the merchant.  All of these steps happen within the transaction processor’s network. Finally, it deletes a charge from a cardholder’s statement and, through a middleman, “charges back” the original amount to the merchant.

It is a powerful tool for the consumer.  With the chargeback process, the merchant loses a sale and absorbs the costs of processing the chargeback.

In addition, credit card companies apply additional charges to merchants with too many chargebacks.

What Does a Chargeback Cover?

You can resort to a chargeback for any of the following reasons:

  • The merchant goes into administration – the store where you’ve purchased from has gone bust.
  • The quality of the item is unacceptable – the goods were not according to their description or were defective.
  • Non-delivery of items – you never received the goods that you’ve paid for and the company refuses to refund you.
  • A technical issue on your transaction – it could be an expired authorization or a processing error by the bank.
  • Clerical error – the merchant charged you multiple times or billed you for an incorrect amount.
  • You were a victim of fraud – someone committed fraud and made a purchase you did not authorize
Instances of Chargebacks
The cardholder files a chargeback, just make sure if your chargeback reason is covered (Photo by ALPA PROD/Shutterstock)

The Timeframe for a Chargeback Claim

As a rule, consumers have between 60 and 120 days from the time of the original purchase to file a chargeback. 

After that, the card companies give merchants 45 days to respond, should they want to dispute the claim.  These are the rules of the credit card processing companies and they vary according to the card issuer whether they be Visa, Mastercard, American Express, or Discover card.

After the merchant submits their response, the merchant bank will investigate the case and come out with a decision.  In case there is a need for arbitration, the entire process can take much longer to complete.

Can a Chargeback Be Denied?

A chargeback can be denied for many reasons. Anytime you make a chargeback, you will have to make a compelling statement saying you did not make the charges and you need your money back. Usually, the charges will have to be different from what you usually spend funds on.

You might also have to show that the charges were completed in a different state or area that you did not travel to. If you do not have compelling evidence, the bank may deny your chargeback. Merchants may also provide evidence to the bank that the charge was actually you.

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1. First, Talk to the Merchant

Most credit card companies will advise that you to first reach out to the merchant and try to resolve the problem.

Most of the time, if a customer is unhappy with something, the merchant will refund their money.

Many consumers do not realize how loud their voices are as a customer and what kind of power they actually have over the merchants.  The consumer has a right to demand from the merchant to make things right to the satisfaction of their customer.

There are reasons why this is a good first step aside from taking a shot at the merchant’s customer-focused values.  Having a paper trail that tracks what you’ve done and who you’ve talked to can be an important card in case your claim gets lost, or if the merchant disputes your claim.

Keep a bit of a journal so you know exactly who you’ve already talked to and what the results have been.  Banks process a lot of these matters on a daily basis, so sometimes you can end up talking to different persons each time you call.

2. Theft or Fraud: Understand The Suspicious Charges

In case there’s a purchase on your credit card that you did not authorize, the law says you’re liable for the first $50 in unauthorized charges.  However, most card companies will not impose this amount on you if you report the charges immediately after you discover them.

If you suspect that someone has stolen your card or your card number, immediately call your credit card company, cancel the card and arrange for a replacement.  The issuer might even monitor the transactions on your account for a period of time. Go through the most recent charges to your card with your card issuer to make sure that all of them are legitimate purchases.

In a lot of cases, you won’t have to take drastic measures.  In fact, your issuer would probably inform you about the fraudulent use of your card before you even notice it yourself.  If you suspect there has been theft or fraudulent use, you can file a police report or a fraud affidavit with the Federal Trade Commission.

3. Know Your Rights And Responsibilities

If you raise a dispute with your card company, they must investigate and get back to you within two billing cycles but not later than 90 days.  You don’t have to pay a charge that is subject to the dispute, but you should continue paying for the undisputed portion of your bill.

In light of this, the card company can’t report you to the credit bureaus as paying late and they cannot also collect interest on the disputed amount.

Not paying the disputed amount is actually the right thing because it preserves your rights to challenge the error under “claims and defenses.”

However, the Federal Trade Commission allows the card company to apply the disputed amount against your credit limit.  For example, if you have an available credit limit of $10,000 and you dispute a charge of an airline ticket of $3,000, you will only have $7,000 in available credit until they resolve the dispute (unless you've asked for a credit limit increase).

If you get a ruling in your favor regarding the dispute, the issuer should cancel the charge and any related interest.

On the other hand, if you lose the dispute, you will be responsible for the charge and any accumulated interest pertaining to the disputed period.  If you still don’t pay at that point, you risk damaging your credit.

how to win a credit card chargeback: tips
Knowing your rights and responsibilities is essential if you want to win (Photo by Bacho/Shutterstock)

4. Don't Give Up Too Easily

If you have a valid complaint and you believe that your merchant is wrong but refuses to refund your money, don’t take no for an answer.

In such a case, you’ll want to get in touch your card company.  Some issuers will require a written dispute but the easiest way to start the process is to call the customer service number on the back of your credit card.

Always provide proof to back up your claims.  Show emails to the seller, ads for the item in question or proof that you’ve returned the product.  These are helpful pieces of evidence.  You may need to provide copies of these documents to the credit card issuer.

Before you make the call, check your records if you have unintentionally signed away any rights.

  For example, if you are disputing a contractor’s work on your home, check the contract first.  Sometimes, contractor’s contracts provide a clause that protects them from credit card disputes.  There is still a way out of this, but it makes the process more difficult.

5. Know Your Limits

Avoiding a dispute in the first place is always easier and less costly than fighting for a chargeback reversal.

The truth is, some chargebacks are harder to fight than others.  It would be better if you can avoid these types of situations if possible.

For example, it is usually easier to get a reversal on chargebacks that come from North America or Western Europe.  Chargebacks that originate from Russia, Ukraine, or Indonesia, are almost always impossible to win.  The lesson here?  Merchants should carefully scrutinize the original transaction for any indication of fraud or irregularity before going ahead.

6. File Under 'Claims and Defenses'

If your dispute turns out to be unsuccessful, you have another chance – file a complaint under “claims and defenses”, a process that the Federal Trade Commission introduced in 1975.  Unlike billing errors, a consumer has up to one year from the time of purchase to file a ‘claims and defenses'.  However, you must satisfy these four criteria:

  • The amount subject to the dispute is more than $50;
  • You must not yet have paid the disputed charge;
  • You must make a good-faith effort to claim a refund from the merchant, and;
  • The merchant’s location must be within 100 miles of your home and within your state (this requirement does not apply for online purchases).

When you communicate with your card issuer after their billing error’s deadline (whether it’s 60 or 120 days), let them know that you will be using your claims and defenses right.

In a lot of cases, you won’t have to go through this avenue.  If you’re a good customer (even if you’re credit card “deadbet”) , your card issuer is going to try their best to help you because they don’t want to lose your business.  It might be confusing to some, but it’s good to know about it.  In case you’re not okay with how your dispute turned out, there is a secondary mechanism to get a chargeback.

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What Happens if a Chargeback Fails?

If a chargeback fails, you will not be able to get the disputed funds back. They will still post to your account, and you must pay them as part of your credit card balance. Once a dispute has been denied, you are usually not allowed to file another for the same charges.

If you think there has been a mistake and a dispute is denied, you might want to consider contacting the company directly or visiting an office in person if there is one.

How Many Chargebacks are you Allowed?

The number of chargebacks you are allowed depends on the bank or credit card company you use. However, most companies allow a maximum of 1% of all transactions. This is about 1 chargeback per 100 successful transactions.

If you are trying to get more chargebacks, you might want to call the credit card company or visit an office personally. They may flag your account as fraud or not be willing to work with you in the future if you are trying to get too many chargebacks.

If you really need more chargebacks, make sure to have all the evidence you can to show that there was a fraud and you need to make some disputes.

FAQs

Yes. Banks and credit card companies both investigate disputes. They will usually contact the merchant and ask what happened and who made the purchase. The merchant will have to verify the purchase or state that it was not you.

If the merchant verifies the purpose and says there was no fraud, then the action is in the hands of the credit card company or bank. If the company knows that the purchases were unusual for you or that they were completed in a different state, they will usually give you the chargeback.

Falsely disputing a credit card charge is illegal. You should not dispute a credit card charge if you are trying to get a purchase for free or if you have buyer’s remorse. Sometimes people will also try to dispute a credit card charge if the merchant did not allow them to return the product or if they no longer need the product.

If a company or bank finds that you are falsely disputing credit card charges, you can face fines and cancellation of your cards and accounts.

To start a chargeback, you will need to contact the credit card issuer and file a dispute. This can usually be done online through your account tabs. You can also call the customer service number or live chat online with many companies.

You will need to dispute each charge individually and submit a fraud claim. Once you have submitted it, the company should call or email you about the next steps and their decision.

When you submit a chargeback, the disputed funds will be held from the business until the card issuers contact the merchant and work things out. If the bank rules in your favor, you will receive the money-back into your account. If the bank denies your claim, the funds will still be posted to the account and you will need to pay them.

Chargebacks usually take a few business days and can only be done after the charges have been posted to your account. The bank cannot investigate pending charges, so you may need to wait a few days until the charges are dropped and refunded.

To start a chargeback, you will need to contact the credit card issuer and file a dispute. This can usually be done online through your account tabs. You can also call the customer service number or live chat online with many companies.

You will need to dispute each charge individually and submit a fraud claim. Once you have submitted it, the company should call or email you about the next steps and their decision.

While many people consider credit card chargebacks to be an unavoidable cost of doing business, there are some strategies you can use to avoid them. The first step is to maintain open lines of communication with your customers. Have a clear return policy in place and explain it to your customers verbally.

You should also strive to clearly describe your services or products so that the customer is not taken aback when they receive the item. Finally, provide excellent customer service by promptly responding to inquiries. This allows the customer to inquire about an issue and receive an answer before filing a chargeback.

While they may appear to be the same thing, there are some significant differences between a credit card chargeback and a refund. Although the customer receives their money in both cases, as the merchant, you will incur additional fees as a result of a chargeback.

Chargebacks are also monitored by the payment processor. If a merchant's chargeback ratio exceeds a certain threshold, which is typically 1%, it can result in serious consequences such as higher fees, larger reserve requirements, fines, or even account termination.

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The product offers that appear on this site are from companies from which this website receives compensation.
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Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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