What Is A Credit Card Chargeback? (2024)

As a user of credit cards or other banking products, your ability to issue a chargeback is one of the most important tools you have to resolve billing disputes and undo fraud. But the term may be foreign to you if you’ve never had to do it.

What Is a Chargeback?

A chargeback is an action taken by a bank to reverse a payment and trigger a dispute resolution process. Generally, chargebacks occur between a merchant and a credit card issuing bank or a consumer. However chargebacks are sometimes issued against consumers, for example in the case of an erroneous ATM deposit. Usually chargebacks are used to reverse a payment in the case of a billing error, unauthorized credit card use or failure to deliver a product or service.

Often this term is used by savvy credit card issuers to refer to the entire process of disputing a credit card charge, receiving an account credit and having the disputed amount taken back from the merchant.

When Should You Use a Chargeback?

The Federal Trade Commission and other regulatory bodies mandate a fair amount of protection to consumers using credit cards. Among other protections, you have the right to accurate billing, protection from unauthorized charges and the right to dispute charges for goods or services that are different than described. In addition to regulatory protections, your bank, credit card issuer or card association may provide you with additional rights.

Most often, chargebacks are issued for one of the following reasons:

• There was fraud or unauthorized use. Someone uses your card without your authorization to purchase goods or services.
• The goods or services were not as described. Goods or services provided were materially different than they were described or agreed to.
• Goods or services were not delivered. You paid for something, but never received it or you paid for a service that was never provided.
• A return credit was not processed. You returned an item or canceled a service within a merchant’s return policy and never received credit for the return.
• A recurring billing was not stopped. A subscription service continued to be billed after you canceled it.
• You were charged the incorrect amount. The amount charged was wrong.

Generally, chargeback abilities are limited to 120 days from the date of purchase and are not meant as a way to protect against loss, damage or theft after a product has been delivered or as an extended return protection or warranty benefit. Fortunately, many credit cards offer these additional protection for consumers.

How Do You Submit a Chargeback?

To dispute a charge and submit a chargeback, you must identify the transaction in question and work with your credit card issuer to initiate the process. Regardless of how you initiate your chargeback request, your bank will walk you through providing the information they require.

Often the easiest way to submit a chargeback request is through your bank’s website. Many larger banks will allow you to initiate or process most disputes entirely online. Usually, you will have the ability to dispute a charge through the web page listing all of your transactions. If you can not find this easily, search the bank’s online help pages for “Dispute a charge” or “Chargeback.” While many chargebacks can be initiated online, your bank may require a phone call for large chargebacks or for chargebacks requiring additional documentation.

If submitting your chargeback request online is not an option, you can call your bank via the phone number on the back of your credit card or customer service phone number. Some banks also offer an online customer service chat that can assist you. Depending on the nature of your chargeback request, the credit card company may request that you also submit supporting documentation via mail or through a form on its website.

Finally, you can always submit your chargeback request in writing to your credit card’s address for “Billing Inquiries.” Note that this address is usually different from the address where you send your credit card payments. Naturally, submitting a chargeback request by mail is likely to take longer than initiating the process online or by telephone, especially if you are required to submit supporting documentation.

What Happens When You Submit a Chargeback?

After you have submitted your chargeback request, your bank will provide written confirmation of your request. Your bank will also either post a temporary credit to your account for the disputed amount or pause required payments and interest on the disputed amount.

Sometimes your credit card issuer will give you an account credit for the amount you dispute. This happens most often with small purchases, where the overhead of contacting the merchant and investigating the chargeback would be far greater than the amount of the purchase.

Most often, after collecting your reason for disputing the charge and supporting documentation, your bank will submit your chargeback to the merchant. Your bank will provide the transaction information, your stated reason for requesting the chargeback and any supporting information that documents your claim. The merchant and their bank will then have a period of time to respond to the bank’s inquiry

Whether the chargeback is accepted or not disputed, your bank will notify you that your billing dispute is closed and will provide an account credit to offset the disputed charge. However, if the merchant responds that the charge is valid and provides documentation supporting their claim, your bank will evaluate the information that the merchant provided and determine whether to issue you a credit for the disputed charge. Once the bank makes its decision, it will provide that to you in writing along with an account credit if your dispute is successful.

If you disagree with the bank’s decision, you can submit a second chargeback before proceeding to your bank’s dispute resolution process, which usually includes arbitration.

What Else Do You Need To Know About Chargebacks?

Often, the easiest way to resolve a billing dispute is directly with the merchant in question. If a product didn’t arrive, contacting the person or company you bought it from is often the best first step. This avenue will likely get you either a refund or a replacement product faster than filing a chargeback would. Likewise, if you believe that a credit card has been billed in error, contacting the merchant can often get a simple mistake resolved within a few days. Most banks will ask if you contacted the merchant directly prior to requesting a chargeback.

Second, your window to submit a chargeback is time-limited, so you should not delay in submitting a legitimate dispute. As an example, for most purchases using Mastercard, chargebacks must be submitted within 120 days of the purchase. The exact number of days you have to dispute a charge varies based on a number of factors, including what the charge is for, the card association and bank policies. Check with your credit card issuer.

Because chargebacks are not guaranteed, it is important to not use your chargeback ability as a replacement for monitoring your accounts for fraudulent use. If your credit card is lost or stolen, it is still important to report that immediately to your bank.

Finally, chargebacks are intended to resolve legitimate billing errors. In the last decade, with the rise in online shopping merchants have seen a corresponding increase in chargeback abuse. The industry has come to term this type of abuse “friendly fraud.” If you abuse chargebacks, you can expect that your bank will take action against you including closing your account. Fraudulent use of chargebacks also could have legal implications.

Bottom Line

The ability to resolve billing disputes by issuing chargebacks is one of the best reasons to use a credit card for your daily purchases. If something goes wrong—a product is not delivered, a service isn’t as described or your request to cancel a subscription remains ignored—chargebacks provide a consistent mechanism and process for you to resolve billing errors.

Knowing how and when to use chargebacks is one of the ways in which you can become a more savvy consumer and user of credit cards and financial products.