By TJ Porter, WCI ContributorCredit cards are incredibly powerful financial tools. Beyond the ability to finance your purchases at zero cost for a short period of time, many of the best credit cards out there offer rewards or luxury travel perks. Another benefit of credit cards is their bevy of consumer protections. While you might be aware of things like extended warranty offers, you may not know about the option to submit a credit card chargeback.
Let's explore that idea today.
What Is a Credit Card Chargeback?
A credit card chargeback is an option you can use when you dispute a transaction that has appeared on your credit card. In effect, you tell your credit card issuer to reverse the payment, taking the money away from the vendor that charged you and wiping it off of your credit card balance.
Imagine you see a charge for $100 in gasoline on your credit card statement, but you did not buy gas that day. You could submit a chargeback, and your card issuer will remove that charge from your card.
How Do You Submit a Chargeback?
Submitting a chargeback is relatively easy. To get started, you’ll need to sign in to your credit card’s online account.
While the exact process will vary from one card issuer to another, the typical steps from there are to identify the charge in the transaction history, click on it to expand the transaction and view its details, and then click a button to initiate the chargeback.
When you submit the chargeback, your card issuer will likely ask you to explain why you’re requesting the chargeback. Write a statement explaining why you want the charge removed from your card and upload any documents that support your request if you have them.
What Happens When You Submit a Chargeback?
Once you submit a chargeback, the ball is in your card issuer's court. The card issuer will start by reviewing your dispute to determine whether you have a legitimate issue or if you will have to pay for the charge.
If the card issuer decides that your dispute is legitimate, it will then pass it on to the credit card network, such as Mastercard or Visa. The card network will once again review the transaction. It may decide that your issue is legitimate or may make your card issuer pay the bill.
If the card network determines the chargeback is being made for a good reason, it will then send the dispute to the merchant’s bank, which will either kick it back, blaming the card issuer, or forward the dispute to the merchant. The merchant then either agrees to pay for the transaction or disputes the chargeback. They may have to go back and forth with their bank during this process.
Ultimately, the card network decides who pays the bill in the end.
In short, the process looks like this:
- You submit the chargeback
- Your card issuer reviews it and, if legitimate, sends it to the card network
- The card network reviews it, and if legitimate, sends it to the merchant’s bank
- The merchant’s bank reviews it and returns to the card network or, if legitimate, sends it to the merchant
- The merchant pays the bill or disputes it
- If disputed, the card network determines who pays
Because of the number of steps involved in the process, it’s not unusual for a chargeback to take a month or even longer to resolve.
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When Should You Use a Chargeback?
There are two main scenarios where you should consider a chargeback.
The first is fraud. If a charge appears on your credit card and you did not make the purchase, you should inform your card issuer immediately and submit a chargeback so you’re not on the hook for a fraudster’s spending.
The other is when you experience severe issues with a product or service.
Typically, if you have a problem with a product or service you buy, you’ll work directly with the merchant to get your problem resolved. However, some merchants are unwilling to work with you. Imagine a scenario where you bought something online only for it to arrive damaged and, even after multiple attempts to get a replacement or refund, the vendor refused.
A chargeback can be an effective way to get your money back if a merchant did not fulfill their end of the bargain and if they have refused to make it right. Just be prepared to show your card issuer that you’ve made reasonable efforts to work with the merchant before pursuing a chargeback.
How Far Back Can You Do a Credit Card Chargeback?
How long you have to begin the process of requesting a chargeback will depend on the situation.
At a minimum, you have at least 60 days to file a dispute in the event of a billing error or fraudulent charge, though card networks and issuers are free to provide additional time.
Some card issuers will give you as long as 120 days to submit a chargeback if you encounter an issue with a product or service you’ve purchased.
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Does a Chargeback Hurt Your Credit Card or Credit Score?
No, a chargeback does not typically hurt your credit card or credit score. After all, if you’re filing a chargeback, it is for a legitimate grievance against a merchant or to recover your money after experiencing fraud.
However, that doesn’t make chargebacks a get-out-of-jail-free card. You can’t submit a chargeback just because you no longer feel like paying for something. Chargebacks are costly for merchants and credit card issuers to deal with, so they usually do their best to limit the number of chargebacks that occur.
If your card issuer suspects that you’re abusing the ability to submit chargebacks or requesting them for fraudulent reasons, it may decide to close your account, leaving you without a credit card to use.
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