By Matt Brownell
Credit cards provide great protection against fraudulent charges, and some can even bag you great cash-back rewards. But perhaps the best thing about paying for your purchases with a credit card is that in the event of a dispute with a merchant, it provides the ultimate ace up your sleeve: the chargeback.
If you didn’t receive the goods you ordered or you feel otherwise wronged by the transaction, a chargeback gives you a refund when the retailer won’t. The issuer will investigate your claim against the merchant and, if it finds it meritorious, will remove the funds from the merchant’s account and put it in yours. Think of your issuer as your tough older brother, setting things right against the bully that’s been stealing your lunch money.
Of course, that doesn’t mean you can (or should) go disputing charge in pursuit of a chargeback anytime a retailer does you wrong. If a product proves defective or never arrives on your doorstep, your first stop should be traditional channels – that is, the retailer’s customer service desk or phone number. It’s only when the merchant doesn’t make with the refund that you should bring in the big guns and call up the issuing bank. (Your issuer should have clear instructions for formally disputing a charge, with options including a phone call, written letter or online form.)
And before you do so, note that not every situation qualifies for a chargeback. The Fair Credit Billing Act, the federal law that dictates how credit card fraud and billing disputes are handled, defines a number of situations as billing errors, including “goods or services not accepted by the obligor or his designee or not delivered to the obligor or his designee in accordance with the agreement made at the time of a transaction.” In other words, if you order a product and it never arrives – or if you refuse delivery because it’s not the product you expected or because it’s damaged – you’re entitled to your money back.
By contrast, simply disliking the product you received isn’t grounds for a chargeback – as the National Consumer Law Center notes in its guide to credit card rights, “You cannot raise a complaint about the quality of merchandise or services you bought with a credit card in the form of a billing dispute.” While being disappointed with the quality of your new toy will usually be covered under the retailer’s return policy, it’s not grounds for getting your bank involved.
So long as the issuer is in compliance with federal law, it’s free to set its own procedures for how to handle these disputes. Take, for instance, the timeframe in which cardholders must contact their issuers, which is set by the FCBA at a minimum of 60 days. A spokesperson for MasterCard says that the issuing financial institutions in its network have discretion to offer a longer timeframe as they see fit, and that most of them offer a 120-day window to dispute a charge. The spokesperson also says that the bank can ask for documentation to support the cardholder’s claim, including “sales slips, contracts, invoices and other types of documentation that will help the issuer fully inform the merchant about the nature of the dispute in non-fraud disputes.” So don’t dispute a charge unless you have some evidence to back up your claim.
Finally, it’s worth noting that banks may go above and beyond the general dispute resolution guidelines set by the issuing network. A spokesman for Chase, for instance, explains that “in cases where Chase is not able to process a chargeback from a merchant, we may, on occasion, provide a courtesy credit to our customers,” at a loss to the bank.
All of this makes chargebacks a potent tool in the consumer’s arsenal, to the point that the mere threat of going to your bank and requesting a chargeback may be enough to resolve the dispute in your favor. But if the retailer still doesn’t blink, don’t hesitate to follow through and take advantage of this key consumer protection.
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