When Should I Dispute a Credit Card Charge?
The number of charges disputes by cardholders have been on the rise since the start of the pandemic. Data shows an increase in consumer disputes involving canceled flights, concert tickets, and other nonrefundable activities.
There have also been disruptions in the flow of supply chains, as well as shipping bottlenecks, leading to inevitable delays. In turn, this places a strain on merchants to ensure happy and satisfied customers.
It can be frustrating when your item doesn’t arrive when expected, or to be placed on a backlog when certain products are out of stock. Some of these scenarios may seem like viable opportunities to request your money back.
However, when it comes to filing a chargeback, there is a right and wrong way to go about it. With that in mind, let’s look at what chargebacks really are, and how they should be used responsibly.
Are Chargebacks Ever the Right Answer?
A chargeback occurs when you dispute a charge made on your credit card and claw back funds from the merchant. Chargebacks were originally created as a consumer protection against untrustworthy merchants and fraudulent activity. However, more and more consumers have started treating them as a first step to getting their money back, often without a valid reason to do so.
Many consumers now mistakenly view chargebacks as another term for a refund. It’s important to understand the difference, though. Chargebacks should only ever be used as a last resort, and only after efforts to resolve the issue directly with the merchant have failed.
Keep in mind, there are some instances where a chargeback can be done legally. Examples include when you:
- Find unauthorized charges on your account.
- Are charged for goods or services that were never delivered or accepted.
- Discover errors in payment details or charges that list the wrong date or price.
- Discover bills that were not sent to your current address.
- Discover payments or other credits that weren’t posted.
- Find charges for which you have requested an explanation or written proof of purchase.
In most of the cases outlined above, you must file a chargeback within 120 days after the first billing error. It can take several weeks, or even months, to finally resolve the case, depending on the circumstances.
Illegitimate Chargebacks are Fraud
It’s important to realize that chargeback abuse is bad news for everyone involved. If you intentionally request a chargeback without a valid reason (a process known as friendly fraud), you could incur penalties or face repercussions if found guilty.
However, most of the loss often falls on the merchant. Chargebacks cost businesses the loss of the original transaction, sales revenue, and the loss of the goods or services provided. Excessive chargebacks can also lead to a bad reputation among processers and banks.
In more severe cases, if a merchant receives too many chargebacks, they also run the risk of being placed on the MATCH list. This is essentially a database of merchants meant to warn acquiring banks not to do business with them.
If a merchant believes that a chargeback request is invalid and the customer should not be refunded, they can dispute the chargeback through representment. If they win the case, you’ll still be held responsible for the original charge, along with any added fees.
Chargebacks as a Last Resort
As we’ve already mentioned, it’s best practice to request a refund with the merchant before disputing a purchase with your card issuer. If you address the issue with the merchant, and honestly ask for a refund, oftentimes merchants are likely to agree. Continuing to file illegitimate chargebacks leads to negative consequences on both sides of the transaction, amounting to a problem that’s more trouble than it’s worth.