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What You Should Know About Credit Card Chargebacks — guest post

About the guest writer: Linda Bustos is an editor for CreditorWeb, where you can read information on credit card use and compare credit card offers online. She has some valuable insights on using credit card chargebacks. On the one hand, it’s nice to know that you have a safety net. On the other, there are steps you have to take before doing a chargeback–she explains those and how to document the steps you’ve taken.

Many people are wary of shopping online because they worry about being taken by an online retailer. Buying something sight-unseen from a virtual store is risky, as is sharing your credit card information with a “stranger.” Not only is your personal information at risk, but you may never receive your purchase – for whatever reason.

But one of the benefits of making purchases with credit cards is you have a recourse should there be a delivery problem, billing problem or some other customer service issue such as canceling an order and not receiving a refund. You may request a chargeback from your credit card issuer and get your money back – provided you prove you have tried to resolve the problem with the retailer or service provider.

You must allow the merchant 30 days to refund your money. Don’t bother requesting a chargeback from the credit card company until then. But make sure you have a written agreement that the merchant has promised you a refund, or that you have made every attempt to receive one (some merchants may just not respond to you).

The best thing to do is to use email instead of telephone to communicate. This way you have a record you can simply forward to your credit card company. Some online retailers have live chat customer service, so make sure you copy and paste the text of the chat or print a copy. You can also take a screenshot of your chat window to prove the chat occurred and the date and time of the chat.

A legitimate business will most likely give you your refund to avoid a chargeback situation, because the merchant will not only have to pay back the bank in full, but also an additional fee! Plus, too many chargebacks could mean a merchant’s ability to accept credit card payment is revoked. It can be very difficult to get another merchant account in the future should this happen.

If you ever find yourself in this situation, call your credit card company and explain what measures you took in attempt to resolve your problem with the merchant. In some cases you may have to provide a written statement as well.

You may also have to pay a fee to your bank for requesting the chargeback, so make every effort to get your money back from the seller – and you’ll both save money.

After filing a dispute, your credit card company may take up to 14 days to investigate the matter. You will receive full repayment from your bank if it turns out the seller was in the wrong. Of course, you may end up spending 2 months worth of interest charges while they remain on your account, so it’s a good idea to pay off your balance in full until the whole problem is solved. [Mrs. Micah’s note: The goal when using credit cards is never to carry a balance, so even if it’s a fraudulent charge, it’s better to pay it off while you’re settling it. You should get the money credited to your next bill. Talk to your credit card company about this while reporting the incident or if you’re waiting to hear back from the merchant.]


{ 8 comments… read them below or add one }

Dad March 11, 2008 at 1:19 am

Pretty good analysis of the situation. If you don’t get immediate satisfaction from the merchant, contact your credit card company quickly to register your dispute. There is a federally mandated 60 day window from getting your statement in which you have to initiate a dispute. Ask the company what you should do. THey may tell you to mail or fax a dispute form usually part of your statement. This will protect your rights under federal law. If you haven’t done this and the time expires, Visa or Master card can say sorry, the time is up. You also need to be aware of the merchant’s return policy up front. If they have a no return policy, you may have trouble getting a refund for a bad product. Non delivery and billing issues don’t count in this, they can always be disputed. But unsatisfactory or overpriced merchandise or service may be subject to the return policy. Read before you order.

Minimum Wage March 11, 2008 at 1:26 am

Yeah, merchants have a strong incentive to avoid chargebacks.

There is a database, a term, and an acronym (I forget what it’s called). Basically, a merchant who gets terminated for too many chargebacks gets added to this database where they become basically persona non grata and nobody else will give them a merchant account. Unlike ChexSystems, this is a database you DON’T drop out of after five years.

RacerX March 11, 2008 at 1:57 pm

Hitting that threshold is usually due to two things: A business with CC control issues (like bad software or people) or a small business that doesn’t do many charges.

Minimum Wage March 12, 2008 at 12:56 am

So I take it then that the threshold is a PERCENTAGE, and it can take only a few chargebacks to hit it if you do few charges?

What’s to stop a small malicious group (e.g. a competitor’s employees, or a group with a political agenda (e.g. opposed to selling fur) from targeting a merchant?

Minimum Wage March 12, 2008 at 1:06 am

Re: CC control issues

That reminds me, the store where I work used to have a customer who was charging hundreds of dollars at a time over a period of months.

We (the employees) were suspicious, but didn’t see anything we could do.

Turned out the card was not valid and
the store was not paid for the charges. Turned out the authorization number was the same every time – the guy came in on different days and shifts to disperse his charges among different employees – and our CC software was approving the transactions.

So we’re fighting with the software vendor over the loss. What’s the outcome in similar situations?

Jeremy March 12, 2008 at 11:12 am

I’ve never had a problem doing a chargeback on a normal CC, but I have had an issue doing a chargeback on a debit/visa card before. They are a lot stricter with those it seems.

Funny about Money March 12, 2008 at 11:42 am

Even though you have to give the merchant thirty days to refund your money, don’t wait a month to let the credit card company know about the problem.

They usually will put a hold on the charge, if they know it’s in dispute. This means you don’t have to pay it until the matter is resolved.

Auguste Dubuisson September 14, 2009 at 12:53 am

That depends on the bank that you have. Bank of America would initiate a temporary charge on your account during the period of the dispute. If they win, the the temporary fund will be permanent, but if they lose, they will take the money back from your account. They win most of the time.

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