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What is a Credit Card Chargeback?

A credit card chargeback is a way for banks to reverse electronic payments. It can come in handy for fraudulent charges, billing errors, and merchant disputes.

April 1, 2022

Nearly 90% of Americans have a credit card. And even those that don’t have a credit card often use a debit card for daily transactions.

If you use a debit or credit card, you have certain protections against billing errors, merchant disputes and fraud. 

One important tool in your toolbox is the chargeback. 

What is a credit card chargeback?

A chargeback is an action that a bank can take to reverse a transaction. Chargebacks reverse a payment that has been made and then begin a dispute resolution process. Chargebacks can be used for billing mistakes, fraudulent transactions and for situations where the goods or services you received do not match what was advertised.

For example, let’s say you make a $50 purchase at a grocery store. A week later you check your credit card statement and see that you were charged twice (two $50 charges). 

In this case, you could request a chargeback with your credit card issuer. The issuer would open a dispute with the merchant. The merchant would review their records and determine that you were indeed charged twice on accident. The charge would be reversed, and you’d be refunded $50. 

Chargebacks aren’t automatic, however. They can take some time (more on this below), and you’re not guaranteed to “win” a chargeback dispute. 

Chargebacks can also be used for debit card transactions. A debit card chargeback will work similarly to how a credit card chargeback works (although the specifics depend on the issuing bank). 

In most cases, a chargeback must be started within 120 days of the purchase date. Each card network has its own rules, but both Visa and Mastercard have this 120-day time limit. 

When to consider a credit card chargeback

Chargebacks help protect consumers, but they only apply in certain situations. 

Fraud/unauthorized use

If you notice fraudulent spending on your credit card, you should contact the credit card issuer ASAP. The card issuer will walk you through the process, and will likely issue chargebacks on any fraudulent transactions. If you believe you have been the victim of identity theft, you should also report it to the authorities

Goods or services not as described

If you receive goods or services that are materially different from what you ordered, you could issue a chargeback. For example, if you order a new PS5, and you receive a used PS5 (and the merchant refuses to correct the issue), this could be grounds for a chargeback. 

Goods not delivered 

If you order goods and they aren’t delivered, you could issue a chargeback. Be sure to check the tracking number first, and contact the merchant to let them know of the issue. 

Return improperly processed

If you return a product to the merchant, but later notice that the funds were not returned to your card, you may need to issue a chargeback for the original purchase. Contact the merchant first to ask for their assistance. 

Unauthorized recurring billing

If you subscribe to a service and later cancel it but notice you’re still being billed, a chargeback may be in order. 

Billing errors

If you are charged an incorrect amount by a merchant, or double-charged, a chargeback could be necessary. It’s helpful to contact the merchant first to see if the issue can be resolved cooperatively. 

Chargebacks are not meant to protect against loss, damage or theft of items. They also don’t protect you against issues that arise with products long after you have purchased them. 

Starting a credit card chargeback

In most cases, you should contact the merchant before starting a chargeback. This gives the merchant the opportunity to fix the problem, which may be quicker than getting your credit card company involved. 

The exception to this is if you see fraudulent or unauthorized transactions on your card. In this case, contact your credit card issuer ASAP. 

If you’re not satisfied with the merchant’s response, or they don’t get back to you at all, you can move on to starting a chargeback. 

Each bank has its own process. Larger banks and credit card companies will typically have an online portal that you can use to submit chargeback claims. You may be able to click on the transaction itself with your online login and dispute the charge from there. Or, there may be a separate page on the bank’s website to start a dispute. 

For smaller banks, you may need to call in. 

To get started, it’s a good idea to contact your bank/credit card issuer and ask about their chargeback process. 

What to expect

You must request a chargeback within 120 days of making the initial payment/purchase. 

Depending on the nature of your request, the bank may ask for additional documentation – a receipt, an online order form, a description of the issue or a picture of the damaged item, for example. 

You will typically receive a temporary credit in the amount of the chargeback. This comes right away but it can be reversed depending on the outcome of the dispute. 

In other words, the bank will likely refund your money right away, but may reverse the refund if you end up losing the dispute. 

From there, the issuing bank typically has around 30 days to review the request. They will contact the merchant for review, who is typically given 7-10 days to respond. 

The merchant can then choose whether to accept the chargeback or contest it. If they contest it, the process can drag on for another 30+ days. 

Once the outcome of the chargeback is determined, your bank will contact you with a notice of the decision and any next steps.

If you win the dispute, the payment will be refunded. If the merchant wins, you will not be refunded. It may be possible to re-dispute the charge if you do not win. However, unless you have new evidence to present, it’s unlikely that the outcome will be different on a second chargeback. 

How to win a chargeback as a consumer

To improve your odds of a successful chargeback, try to provide as much information as you can to your bank. The bank will use this information in its review.

And again, chargebacks are intended as a last resort. It’s easier to attempt to resolve a dispute directly with the merchant. 

Bottom line

Chargebacks are a useful tool to have in your back pocket. Knowing how, when and why to use a chargeback is knowledge that everyone should have. 

Is credit card debt holding you back from your financial goals? Tally† may be able to help. Tally is a credit card debt repayment tool that helps qualifying Americans get out of credit card debt faster. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.