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Using Chargebacks - Fraudulent Charge Protection, Merchant Disputes, Credit Card Rights

Chargebacks Provide Protection to Credit Card Users

Last Updated: June 13, 2016

The chargeback exists primarily to protect consumers. The Fair Credit Billing Act, which is part of the Truth in Lending Act, was written to protect the consumer against inaccurate and unfair credit billing and credit card practices. Not every situation qualifies as a chargeback, so before you go pursuing this you need to understand what you can and can not dispute with the credit card company.

Definition of a Chargeback

Credit cards provide protection against fraudulent charges in the form of a chargeback. Let's say you made a purchase, either in-person or on-line, and you later feel wronged by the transaction. Meaning, you did not get the item you ordered or the item you received was not was you thought it was going to be. So, you try to get a refund from the merchant and they won't refund your money.

Once you come to this impasse, the next thing for you to do is file for a chargeback. You make your claim with your credit card company giving them all the details of the transaction and why you feel you have been wronged. The issuing bank will investigate the claim and if they find in your favor, they will remove the funds from the merchant's account and put it back into yours - thus giving you a chargeback.

Steps Involved in the Chargeback Process

The chargeback process involves a number of steps and may take months to resolved. The typical steps involved are:

  1. The cardholder contacts their card-issuing bank to dispute a transaction.
  2. The card-issuing bank determines whether or not there is sufficient evidence to support the cardholder's claim.
    • If sufficient evidence is not available, the dispute is declined.
    • If sufficient evidence is available, a temporary credit is provided to the cardholder. The card-issuing bank will also start the chargeback process and seek to obtain credit from the merchant's processing bank for the amount in dispute.
  3. The merchant's processing bank researches the chargeback.
    • If they determine the chargeback is invalid, they will refuse the chargeback and return it to the card-issuing bank.
    • If they determine the chargeback is valid, they will accept the chargeback and remove the disputed amount from the merchant's account and provide the merchant with a written notification.

What Does Not Qualify as a Chargeback

Pursuing a merchant for a chargeback may sound like a pretty good idea, but don't get carried away. This process is not meant to dispute any and every charge just so you can get your money back or just because you think a retailer did you wrong. If a product never arrives at your doorstep or it is defective, your first course of action is to call the merchant and try to work out a refund with them first. It's only when the merchant will not refund your money or replace the item should you even consider getting your bank involved.

Now, if you received the product and you simply do not like it, that is not grounds for a chargeback. According to law, you can not raise a complaint about the quality of merchandise or services you bought in the form of a billing dispute. In these instances, you will have to pursue this under the retailer's return policy.

When it comes to presenting your claim to the card-issuing bank, make sure you have all the supporting documentation to give to them. Don't dispute a charge unless you have some evidence to back up your claim.

In summary, a chargeback is a powerful tool when dealing with merchants and fraudulent charges on your credit card. If you have been wronged by a retailer, just the mere suggestion of a chargeback may be enough to resolve the matter in your favor. But, if the retailer is not responding to your threat, don't hesitate to follow through and contact your card-issuing bank and start the chargeback proceedings.

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