when-to-file-a-chargeback

When to File a Chargeback

The Difference Between a Refund and a Chargeback

Many consumers have learned there is a quick and easy way to get a refund for a credit card purchase. Rather than contact the merchant directly, many consumers choose to dispute the transaction with the bank.

Consumers have every right to file a chargeback, or obtain a forced refund from the bank, in certain situations. But those situations are few and far between. Usually, consumers are filing illegitimate chargebacks.

Are you one of those consumers who is filing a chargeback for the wrong reason?

Refunds vs. Chargebacks: The Main Differences

Many times, a consumer will file a chargeback without sufficient information. The consumer is unaware of the difference between a traditional refund and a bank-issued refund.

On the surface, it may not seem like there is a big difference between a refund and a chargeback. Either way, consumers get their money back. However, it is important for consumers to understand there is a very big difference between a refund and a chargeback.

Refunds

Refunds are pretty self-explanatory and should be familiar to most consumers. Businesses often print refund policies on the back of receipts or have them prominently displayed by the cash register. Similarly, online businesses are careful to post their refund policy in the fine print during the check-out process.

To get a refund, customers must simply bring the problem they have to the merchant’s attention. More often than not, businesses are willing to work with customers to find an acceptable resolution for both parties. While no business owner likes to lose revenue, refunds are still good for businesses because:

  • Business owners are actively involved in the refund process, which gives the business some control over when the funds are removed from the merchant account.
  • The merchandise is returned to the business, so the merchant has a chance to resell the goods for profit.
  • Although the processing fees for the transaction are not returned to the merchant, there are no additional fees for issuing a refund.
  • Once the refund is issued, the merchant is able to continue business as usual.

Chargebacks

“Chargebacks remedy credit card transaction complications that arise from merchant error or criminal intent.”
Monica Eaton-Cardone, eConsumer Services® Co-Founder

Perhaps you made a purchase that you later came to regret, or maybe you just don’t have time to go back to the store and ask for a refund. So instead, you might be tempted to file a chargeback with the bank and get your money back that way.

While filing a chargeback may seem like a harmless substitute for getting a refund, chargebacks can have detrimental effects on businesses, not to mention filing unwarranted chargebacks is a form of fraud. Chargebacks especially hurt businesses because:

  • Chargebacks are initiated between a customer and the customer’s bank, so businesses are not aware that there was a problem with the transaction. Thus, businesses do not have a chance to correct the problem.
  • Banks withdraw chargeback funds from the merchant’s account without any advance notice. Merchants wake up one day and a sizable portion of their revenue is gone.
  • The merchandise under dispute is not returned to the merchant, so the chance of reselling the goods for profit is lost.
  • The merchant must pay a chargeback fee, which can range from $20 to $100, regardless of the value of the transaction. These fees are in addition to the original processing fee for the transaction.
  • Each chargeback is a black mark against a merchant’s financial reputation, which puts the business in danger of losing the ability to accept credit cards as payment.

When SHOULD Chargebacks Be Filed?

Now you may be thinking “So, I should never file a chargeback?” While you should not file a chargeback when a refund is more appropriate, there are several instances in which chargebacks may be necessary.

After all, chargebacks were created as a form of consumer protection to keep you and your credit card safe.

Cardholders can reasonably file a chargeback when:

Chargebacks should always be filed as a last resort.
  • You notice a transaction charged on your account that neither you nor anyone with legitimate access to you card made. If it is possible that someone in your family, such as a child or a spouse, made the transaction, ask them before filing a chargeback. Chargebacks protect consumers from legitimate identity theft.
  • You make an online purchase that was not delivered within the specified time frame, but your card was charged anyway.
  • You cancel a recurring payment but are charged anyway.
  • You purchase a product or service and it is defective or not as described AND the merchant refuses to issue a fair refund.

Even though these situations could plausibly warrant a chargeback, it is still in your best interest to contact the merchant before the bank. Sometimes there was a simple misunderstanding (like you calculated the delivery date wrong or didn’t recognize the charge on the statement).

If you are struggling to reach a conclusion with the merchant or simply don’t have time to deal with a refund, let eConsumer Services® help. We can secure a quick and easy refund on your behalf. It takes less than five minutes to file a claim.

Chargebacks should always be filed as a last resort.

Chargebacks Can Hurt Consumers Too

While chargebacks are clearly a losing deal for merchants, it is important to recognize that filing illegitimate chargebacks can have an adverse effect on cardholders too. Chargeback fraud has negative consequences for the consumer too.

  • Refunds are processed much more quickly, often in just a couple of days versus the months it can take for chargebacks to be processed.
  • If cardholders commit friendly fraud and the bank finds out, their accounts can be closed, which is bad for credit scores.
  • The bank might transfer the chargeback fee to the unwitting cardholder if the merchant successfully disputes a bogus chargeback.
  • Cardholders who regularly abuse the chargeback mechanism may not get the help they need in the case of actual identity theft.
  • Because chargeback fees are increasing the merchants’ costs, business are forced to raise their prices.

Although filing a chargeback may sometimes seem more efficient than going to the merchant for a refund, remember that chargebacks can hurt you too if they are used improperly.

If you need assistance requesting a refund or combatting a legitimate case of fraud, eConsumer Services® is here to help. Contact us today and we’ll start working on your behalf.