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Credit Card Chargebacks 101 – Process & Rules for Shoppers

When credit cards are used wisely, they offer an incredibly convenient way to pay for goods and services. They fit neatly in your wallet, you don’t have to carry loads of cash, and you can easily shop from the privacy of your own home via the Internet – all thanks to a little piece of plastic.

The other bonus? When you pay for things with a credit card, you are guaranteed by law to receive them as promised. If you don’t, federal regulations require that credit card issuing banks reverse transactions in these types of cases in the form of a chargeback.

A chargeback is an extremely powerful tool to compel companies to do the right thing. Read on to find out more.

Using Credit Card Chargebacks

When to Use a Chargeback

While credit card companies can address fraud internally, a chargeback can be requested in cases when you have legitimately authorized payment for goods or services that were either not received or were not delivered as described. In these situations, your first step should be to give the merchant every opportunity to refund your money or reach another settlement that is acceptable to you. Only after you have exhausted all of your options in attempting to reach a settlement with the merchant should you then contact your credit card company and begin the chargeback process.

In some instances, there may not be a company left to contact. For example, I once had VoIP telephone service with a company that went out of business. Absent any means to request my money back, I was able to have my credit card company issue a pro rata refund of the payments I had already made.

How to Reach a Fair Settlement Without Issuing a Chargeback

For retailers, chargebacks are very serious. In addition to incurring the substantial hassle in defending themselves from your accusations, they suffer large financial penalties with their credit card processor each time a chargeback is issued against them. Eventually they will be paying more money for each credit card transaction they process and in extreme cases they will lose their ability to accept credit cards altogether.

For these reasons, informing an unruly merchant of your intent to file for a chargeback is one of the best tips to outmaneuver customer service strategies. Representatives at companies large and small are trained to take these threats seriously and are empowered to resolve issues in your favor in these cases.

The Process of Requesting a Chargeback

Process Requesting Chargeback

Once you have tried everything, including the threat of a chargeback, there may be no other recourse than to call your bank to actually request one. Your bank should take down details of your complaint over the phone and issue a temporary credit for the amount in dispute.

Next, you will receive a form in the mail asking you for additional details and documentation to support your allegation. Once the bank receives your documentation, the merchant will have the opportunity to respond.

Finally, the bank will inform you of their decision to approve or deny your chargeback request. If it is denied, the disputed amount will again be charged to your account.

How to Win a Chargeback

You should begin by collecting documentation from the moment you suspect that a merchant may not be dealing fairly with you. Like the threat of a chargeback, presenting that documentation may also compel the other party to do the right thing.

Once the chargeback has been requested, fill out your bank’s form in a timely manner. Be concise, limiting your case to only the relevant details while providing ample supporting documentation.

Remember that your submission will be read by someone who evaluates chargeback requests all day long. That person will be looking for solid proof that the goods or services you paid for were not received, or that they were substantially different than their description. For example, if an item you received has a different specification than the advertisement, this would be a much better case than one where you felt that its general quality didn’t meet the description.

Final Word

By using your credit card as a method of payment, you are guaranteed by law to receive the products or services that you paid for. Not only must you receive them in a timely fashion, but they must also be delivered as described. When things go wrong, the representatives at a large company will often be unable or unwilling to do the right thing when it comes to refunding your money.

In other instances, smaller unscrupulous business will deny a legitimate request for a refund in the hope that you will not request a chargeback. By utilizing this option as a final resort, you can realize your legal rights and avoid being the victim of dishonest or incompetent merchants.

Have you ever resorted to using a credit card chargeback to get your money back? What was the process like and what was the final outcome?

Jason Steele is one of the nation's leading experts in credit cards and travel rewards since 2008. Jason is also the founder and producer of CardCon, which is The Conference for Credit Card Media. Jason lives in Denver, Colorado where he enjoys bicycling, snowboarding and piloting small airplanes.