Handling a Credit Card Chargeback

Written by: ShawnTe • Edited by: Laurie Patsalides
Updated May 20, 2011

Chargebacks are pretty common place with credit card usage. At one time or another a person will have a dispute with a merchant that can not always be handled between the merchant and consumer. This guide will provide you with the basic tools you will need to dispute a transaction.

What Is a Credit Card Chargeback?

A credit card chargeback occurs after a cardholder initiates a merchant dispute with their issuing bank, the issuing bank then will charge back the transaction(s) being disputed to the merchant and the cardholder is credited for the disputed transaction(s). Credit card chargebacks are initiated by the issuing bank and can only be processed after an investigation of the disputed transaction(s) occurs. Merchant disputes can take a day or two before a chargeback is initiated or they can take several weeks if extensive research is required.

The main issue with credit card chargebacks is that the issuing bank typically only has two attempts to charge a transaction back to a merchant. There is a first “presentment” or chargeback of the case with details gathered from the cardholder that is sent to the merchant's bank, the acquiring bank, for review with the merchant. If the merchant contests the credit card chargeback, they will present documentation validating their side of the dispute. The issuing bank then presents this information to the cardholder giving them one more chance to present a stronger case for their dispute, if available. If a second credit card chargeback is processed and the merchant still contests it then the chargeback process is finished. With only two shots for a cardholder to regain their money back for a disputed transaction, what steps can cardholders take during a transaction to prepare them in the event they find themselves disputing the charge?

Documentation Is the Key

The good and bad news about “covering your assets” in regards to credit card transactions lies with retaining documentation. Whether you make a purchase on-line, over the telephone, or in person there are two important details about a transaction you must make yourself acquainted with: the nature of the transaction and the merchant's cancellation/return policy.

The first line of defense with any credit card transaction is to know the nature of it. Read the terms and conditions of any purchase made. This is important because some transactions are an introductory or enrollment into a program that will charge your credit card on a recurring basis. It is not always the merchant's responsibility to advise of these types of transactions in an upfront manner, sometimes these terms of sale are hidden.

The second line of defense is to be acquainted with the merchant's cancellation and return policy. If you purchase a product that is in good working condition however, you then decide you no longer want it and take it back to the store for a refund, you expect to get your money back. This is not always the case. The merchant may very well have a no return policy and with this type of policy they are under no obligation to accept the return and give you a refund. The same goes for canceling a transaction, if the merchant has a no cancel policy, you will still receive the merchandise or service regardless if you no longer want it.

It is prudent for you as the cardholder to retain documentation pertaining to the terms of sale and the merchant's cancellation/return policies. This documentation will help you if you have adhered to the merchant's terms of sale and policies for a disputed transaction. However, documentation about the terms of sale and merchant cancellation/return policy are not the only document you should keep.

Documentation Needed for Certain Types of Disputes

If you cancel a transaction adhering to the merchant's cancellation policy, yet the merchant has failed to issue a credit card chargeback, you will need to retain the following documentation to build a strong case should you initiate a dispute:

Merchant's cancellation/return policy at the time of your sale.
Confirmation of your cancellation – confirmation code, letter, email from merchant, or receipt showing credit is due.
Proof of your return – tracking history, signed delivery confirmation, or merchant written acknowledgement your return was received

You can dispute a transaction the represents delivered merchandise that is damaged or does not adhere to the product's written description. For example, if you receive a computer that is supposed to have a 300GB hard drive but the unit you received only has a 150GB hard drive this evidently is not what was ordered. You wish to return it because the unit received is not the unit that was described at the time of your transaction. You should have the following documents on hand if you need to dispute the transaction:

A copy of the invoice with the product description clearly written or product item number and a product description that matches the product item number on the receipt/invoice.
A picture of the product received – to show how it is not as described or to show how it was damaged or defective.
Proof of your return

Build Your Arsenal

In any type of dispute, you as the cardholder must have a signed statement of the details of your dispute before a credit card chargeback can be initiated. You are the one seeking the dispute and a return of your funds; therefore, you must provide a signed statement with the details about the nature of your dispute. Your signed statement along with corroborating documentation are your arsenal that will build a strong dispute case for you so that your issuing bank can process a credit card chargeback. Be aware of what your transaction represents, know the merchant's return/cancellation policies, and have documentation to back up your claim. The success of your chargeback depends on it.

Resources

Visa Chargeback cycle - http://usa.visa.com/merchants/operations/chargebacks_dispute_resolution/chargeback_cycle.html
Visa International Operating Regulations and Dispute Rules - PDF
Matercard Chargeback Guide - PDF

ShawnTe Dec 9, 2011 5:57 PM

RE: Handling a Credit Card Chargeback

Hello m1, I can't give you solid answer as to whether or not you can dispute this matter with the collection agency. I think it may be wise to seek legal counsel concerning this as collection agencies have their own rules they follow and sometimes will seek legal action against a debt. Legal counsel would be well-versed in the laws of your state and handling debt cases such as this. Plus they can speak with the collection agency on your behalf to resolve the matter. I'm sorry that I cannot offer any other advice than this. However, I am not equipped to assist you with this matter as it falls outside of my scope of knowledge. I wish you well in finding a resolution.

m1 Dec 8, 2011 1:48 AM

i hope you can answer my question... i've gone through my bank for a credit card dispute on an item i ordered online, but I believe was fake. i tried to cotnact the merchant regarding my concern, and they wouldn't accept my return. i contacted my credit card company, disputed the charge, and returned the merchandise with tracking information. my credit card company then gave me a refund. however, a few weeks later, i received a collection notice from a collection agency, whome the merchant apparently hired to collect money from me. they have the item, and i have proof that they received it. their claim is that i didn't acknowledge their return policy. do you think i can dispute this with the collection agency?

ShawnTe Oct 2, 2011 3:24 PM

RE: Store refuses to deliver merchandise

Sandra, I am sorry for the situation the merchant has placed you in with the chandelier. As far as your credit card charge goes, your issuing bank can only seek the refund back from the merchant. They cannot force the merchant to give you the merchandise.

From the bank's perspective, the $2,500 transaction represents the purchase price of chandelier. If you do not receive the chandelier then you can get your money back. If the merchant agrees to cancel the order and issue you a refund get this advisement in writing via a credit slip or written acknowledgment that a credit is due. You can then contact your issuing bank providing all of the details and documentation associated with the transaction if the merchant does not issue a credit or send you the merchandise after 30 days from the date the merchant agreed to issue a credit. On day 31 is when your issuing bank can step in and seek the credit back on your behalf.

If you still want the chandelier you may need to check out what legal remedies are available to you via the court system. However, I strongly advise seeking legal advice before taking this up with the courts or research what your state laws have to say on the matter first. As I mentioned, your bank can't get the merchandise for you, only the credit.

Sandra Oct 2, 2011 1:21 PM

Store refuses to deliver merchandise

Purchased a chandelier from a high end furniture store in the amount of $2500, which was paid in full, with an expected delivery date of 4-8 wks. Three weeks later received a call from store stating they made an error in pricing and refused to deliver item. Merchant stated the company they get chandeliers from "misquoted" price to them. The store now expects another $2800 from us. They gave us two options: Get a refund or pay the difference. What are my rights. I still want the chandelier.

ShawnTe Jun 22, 2010 12:53 PM

RE: Shane P

Here is the tricky thing about contracts when it comes to cancellations and return of merchandise, a contract or written policy typically is the merchant's best friend when it comes to a CC dispute. Unfortunately, clauses pertaining to the merchant not being responsible for merchandise that is shipped to the consumer is a case the merchant may not be able to win.

The credit card company sees it this way, if the customer paid for merchandise that is to be shipped to them, then the merchant is responsible for making sure that merchandise reaches the customer. The only time where a merchant can possibly win a dispute for lost or damaged shipment not reaching the consumer, is when the consumer chooses the the shipping company. Even then, the merchant may lose on first presentment.

When a merchant fulfills an order, they are responsible for the shipper they choose as well. How the CCC sees it, you need to take up the issue with the shipper or get the money back from the customer directly via the courts. However, legal proceedings can be costly so it is best to seek the council of a lawyer to find out if seeking restitution in a court of law is cost effective.

Shane P Jun 22, 2010 2:07 AM

Merchant lost the chargeback

I am a merchant and I was on the losing side of a dispute. Basically it was a contract purchase where a oversees customer ordered special order parts that we don't stock. The customer entered into a legal binding agreement that if the buyer rejects insurance coverage on the shipment and the package becomes damaged, lost, misdirected, etc he would hold us harmless and any claim would be voided. He filed a dispute 110 days later citing non delivery. The CCC asked up to supply proof of delivery with signature as well as documents showing we actually shipped it and documents that we had it in our possession (invoice). We could only provide 2 of the three obviously and we showed the policy he agreed to be bound by (http://allversionperformance.com/terms.html) and the CCC basically ignored us and settled in his favor.

stevon john Jun 1, 2010 8:03 AM

Credit Card Chargeback

Excellent article!!

ShawnTe Apr 19, 2010 1:53 PM

RE: Help Need

-continued from my previous comment -

Obtaining a second expert opinion is an expense you can not dispute, unfortunately. You can still proceed without this evidence but your chargeback will be weak. Be aware the merchant can still counter the chargeback even with this evidence. If you should ultimately lose your dispute, you can seek other legal avenues to regain your money from the merchant such as going to small claims court with your case. In cour you might be able to also include all of your additional expenses. I strongly advise seeking legal council before you take the merchant to court to find the best way to handle the situation after your dispute.

If your card is a Visa this PDF document o the Visa merchant dispute rules will benefit you greatly:
http://usa.visa.com/download/merchants/visa-international-operating-regulations-dispute-resolution-rules.pdf

I wish you luck!

ShawnTe Apr 19, 2010 12:31 PM

You have a tough one here. I really do hope this happened recently because for most transactions you have 120 calendar days to dispute them. Sometimes an extension can occur if the merchant sends you recently dated correspondence related to the transactionThis sounds like a case of receiving a service that is "not as described" (the term Visa and MasterCard typically use to describe such disputes).

Here is documentation you will need to build a strong case for yourself:
1. Your invoice or contract from Roto Rooter specifically stating how many feet of pipe were replaced.
2. (this is the pain in the butt right here) A second expert opinion specifying that Roto Rooter only replaced 18 feet of pipe not 37 feet. This second expert's opinion must be signed with the expert's and include his/her company's information (company name, address and telephone number).
3. Your signed and dated letter providing the details of your dealings with Roto Rooter fromthe beginning up until the date you draft the letter. Make sure to include a copy of your credit card statement showing the transaction being disputed (circle it or place a check/"x" mark next to it - do not use a highlighter)
4. A copy of all written correspondence received from Roto Rooter.

You can't dispute the entire charge, but you can dispute part of it. If the invoice Roto Rooter gave you list the cost of the pipe per foot then you can only dispute the cost of the 19 feet of pipe that was not replaced. The most important pieces of documentation are items 1, 3 and 4(if you have merchant written correspondence). Item #2 is the clincher for your dispute because it proves Roto Rooter did not complete the service you paid for. Without this info the merchant can say they did what was on the invoice leaving your bank with no further evidence to prove your claim. However, this could cost you a lot of money so you need to weigh the pros and cons about obtaining this information.

winfield Hudson Apr 17, 2010 7:57 AM

Help Need

Roto Rooter gave me an quote to replace plumbing pipe 37 feet at a cost $2100.00. Roto Rooter stated they needed my credit card # before performing the work after Roto Rooter completed the work I discovered they only replaced 18 feet of pipe at my rental home. The remaing 19 feet of pipe was inbedded in concrete and not removed. I was out of town at the time of the work. I requested that Roto Rooter fax me the invoice to sign before leaving my rental property. The plumber refused and stated he would have the tenant sign the paper work. I told the plumber she was not authorized to sign for me. I tried contacting Roto Rooter for the next 7 days and no one would call me back until I escalated the issue to their corporate office. It appears Roto Rooter will not do anything to adjust the cost and yesterday Roto Rooter finally gave me a copy of the invoice signed by another person. I am willing to pay for the 18 feet of pipe replaced but not the additional 19 feet of pipe that was not replaced. Do I have to pay this full charge? What are my chances of having my credit card company remove the charge?

ShawnTe Jan 27, 2010 10:37 AM

RE: dispute

I am sorry you did not win your dispute. You may want to consult a lawyer or contact your local Legal Aid offices for advice. If you are locked into a contract with the Travel Club, a lawyer may be able to get you out of it. However, the extent of legal action that can be taken depends heavily on the documentation you have and the laws of your state for situations like yours. A lawyer should know what options you have to further pursue the matter outside of your credit card company.

I wish you the best of luck in whatever you decide concerning this matter.

James Torres Jan 27, 2010 8:15 AM

Lost a dispute

I lost a dispute with a credit card company (ccc)regarding a Travel Club. The ccc rejected my claim due to no rescind clause in the contract. When I showed I was unsatisfied with the service listed on the contract (no deep discounts and could book cruises on line) ; the ccc claimed the travel club had a service and did not consider my dissatisfaction because they claimed it was a quality issue.

Appears the ccc is holding me to a higher standard than the merchant. The merchant can use the contract against me, but I cannot use it against them (they clearly promised deep discounts and booking on line in the contract).

I was already rejected 3 time for the same reason "rescind clause". The ccc never considered my claim of being dissatisfied. Do I have any option left?

ShawnTe Jan 26, 2010 3:42 PM

RE: FCBA

Yes the FCBA does apply to disputes, however a customer must prove why a product or service is unsatisfactory. For services it is trickier for a customer to prove that a merchant did not perform the service as described. Finding a product unsatisfactory is easier to win, because if the customer can prove they returned the merchandise the customer's bank can seek a chargeback 30 days after the return if the merchant has not issued a credit. Even if the merchant fights it, as long as the merchant still has the returned merchandise they lose.

Keep in mind a customer can dispute any charge they wish to, whether or not their dispute ends in their favor depends on the details and documentation provided by the customer. Not being satisfied with a product without an underlying reason, such as defective merchandise, is deemed "buyer's remorse" and does not hold water well in any type of dispute situation. The saddest cases I used to run into involved timeshares. Customers decided they no longer wanted to be locked into the timeshare and they would dispute the charge before trying to resolve with the merchant. Basically it boiled down to a customer not reading their contract thoroughly. Most of the time we would attempt the chargeback twice and get denied. However, all of the documentation gathered during the dispute process is useful to the customer to seek restitution in a court of law.

James Torres Dec 21, 2009 1:47 PM

Fair Credit Billing Act (FCBA)

Excellent article!!
I wanted to add that the FCBA applies to any credit card dispute. Which means that even if the merchant has a no rescind clause in a contract, but the services or products are unsatisfactory. You can dispute the charge and get a credit to your account.