Credit Card Chargeback

A credit card chargeback is a mechanism that protects consumers. This facility allows cardholders to dispute any unauthorised or incorrect transaction and request a refund from the issuing bank. It is typically used in cases of fraud, billing errors, or when goods and services are not delivered properly.

Once a chargeback is initiated, the issuer will investigate the legitimacy of the claim. If the claim is valid, the charge is reversed, and the amount is deducted from the merchant’s account. Chargebacks differ from standard refunds because they are initiated by the bank rather than the seller.

A chargeback is a process wherein the credit card holder requests their issuer to reverse a transaction. This generally happens due to fraud, billing errors, or non-delivery of goods or services. This mechanism is in place to ensure that customers are not held liable for unauthorised transactions. Here is how a chargeback works:

1. The cardholder identifies a questionable transaction and contacts their issuer to dispute the charge

2. The issuer reviews the claim to determine its validity

3. If the claim is valid, a provisional credit may be provided to the cardholder’s account

4. The issuing bank then forwards the dispute to the merchant’s acquiring bank, which informs the merchant about the chargeback

5. The merchant can either accept the chargeback or contest it by providing evidence supporting the transaction’s legitimacy

6. Based on the provided evidence, the issuing bank makes a final decision

7. If the chargeback is upheld, the provisional credit becomes permanent. If not, the charge is reinstated to the cardholder’s account

It is important to note that initiating a chargeback should be the last resort, used only when direct resolution with the merchant fails. Misuse of chargebacks can lead to penalties and even account termination.

You should consider requesting a chargeback if you find yourself in the following situations:

Unauthorised Transactions

If your credit card statement includes charges that you did not authorise, it may indicate fraud. Contact your credit card issuer immediately to dispute the transaction.

Non-receipt of Goods or Services

If you paid for goods or services that were never delivered and all attempts to resolve the issue with the merchant have failed, file a dispute with your card issuer to recover your funds.

Incorrect or Duplicate Charges

If you were billed incorrectly or notice a duplicate charge for a single purchase, and the merchant fails to rectify the error, you can dispute the charge. Filing a chargeback claim can help resolve the issue.

Defective or Misrepresented Products

If your order is defective or misrepresented and the merchant refuses a refund, you may need to dispute the charge. In such a case, initiating a chargeback can be a viable option.

If you think you have been wrongly charged for a transaction, the first step is to contact the merchant and request a complete refund. If the merchant fails to resolve the issue, you can formally request a chargeback through your credit card issuer. Here is how you can request a chargeback:

1. Contact your credit card issuer and submit a chargeback request

2. Provide the necessary details about the disputed transaction, including the transaction date, amount, and reason for the chargeback

3. The credit card issuer will review your claim to check its legitimacy

4. If the claim is valid, the issuer will credit the disputed amount to your account on a temporary basis

5. The issuer will then forward the chargeback request to the credit card network, such as Visa or Mastercard

6. The network will assess the dispute and may either approve the refund or escalate the case further

7. The merchant’s bank will receive the chargeback request and inform the merchant about the claim

8. The merchant can either accept the chargeback or contest it by providing evidence to dispute the claim and prove the transaction was legitimate

9. If the merchant accepts the chargeback, they will refund the amount

10. If they dispute the request, it goes back to the card network, which will make the final decision

11. If the decision is made in favour of the cardholder, the temporary credit becomes permanent

If you are dissatisfied with a purchase, you may try to recover your money through either a refund or a chargeback. While both processes serve a similar purpose, they differ significantly in terms of who initiates them, the parties involved, and their impact on the merchant. Here are the key differences you should know about: