Filing a chargeback can be a valuable tool for consumers who want to dispute certain credit card charges. It’s a way to get money back for fraudulent transactions and for purchases that merchants aren’t willing to refund.
However, this tool might lose some of its value soon. Visa recently announced a change to its dispute program to make it easier for merchants to prove that disputed charges are valid—and more difficult for consumers to win chargeback disputes.
The move comes in response to what Visa said in its newsletter was a rise in chargeback abuse from consumers submitting false claims. “A recent study by SIFT found that nearly one in five consumers who have filed a chargeback dispute have committed first party fraud by submitting false claims in order to get their money back on legitimate purchases,” according to the newsletter.
Credit industry experts say the move makes sense for Visa and merchants but might impact consumers negatively. “I have no doubt that these types of incidents are a big pain for those companies, and I don't blame them for cracking down,” says Matt Schulz, chief credit analyst for Lending Tree. “However, I hope it doesn't also lead to them making it tougher to dispute legitimate fraud or keep consumers from reporting it.”
Going forward, if you need to file a legitimate dispute, make sure that you understand the chargeback process and that you follow the rules carefully to increase the chances that your dispute will be approved.
What is a chargeback?
Consumers have the right, under the Fair Credit Billing Act, to dispute certain charges and billing errors. When you dispute a charge with your credit card or debit card issuer, that process is called a chargeback. It can be used for the following types of charges:
- Fraudulent or unauthorized charges on your account
- Incorrect charges on your account
- Items or services you paid for but didn’t receive
- Items that arrived damaged or defective
- A service you canceled but continued to be charged for
In cases of fraud, you should alert your card issuer immediately. Your liability for fraudulent credit card charges is limited to $50, but the limits can be higher for fraudulent debit card charges if you don’t report them within two days.
However, in situations where there is an issue with a product you bought, you should contact the merchant who sold you the product first to ask for a refund. If the merchant isn’t willing to refund you, you can reach out to the issuer of the card you used to purchase the item to file a dispute and start the chargeback process.
The process can take a while—up to 90 days—because the card issuer has to investigate the disputed charge and determine whether the merchant has to reimburse you.
How to file a chargeback
A chargeback should be used only when there have been fraudulent charges on your account or when a merchant won’t abide by its return policy and won’t refund you for an item that was damaged, defective or never received. It shouldn’t be used simply because you have buyer’s remorse or want to get around a merchant’s refund policy.
The process for initiating a chargeback can vary depending on the card issuer. Typically, though, you can begin the dispute process by phone, mail or online.
If you make contact with your card issuer by phone or online, follow up with a letter. You must notify the card issuer in writing about the charge you’re disputing within 60 days of when the bill with the disputed charge was sent. The Federal Trade Commission has a sample letter for disputing credit and debit card charges.
Send the letter by certified mail to the address the card company lists on your account statement or its website for billing disputes. Include evidence to support your dispute, such as a copy of your receipt, documentation of shipment or photos of the damaged item.
The card issuer must acknowledge receipt of your letter within 30 days of receiving it. And it must resolve the dispute within two billing cycles (up to 90 days) after getting your letter, according to the FTC. You don’t have to pay the disputed amount owed during the investigation. If the card issuer decides you must pay the amount, you should receive a written notice.
Why winning a chargeback with Visa might be harder
The change to Visa’s dispute program will take effect April 15, 2023. It’s meant to combat what is called friendly fraud—which Visa says includes when cardholders dispute legitimate purchases such as forgotten recurring subscriptions or charges on their cards made by their children.
“To me, this looks like Visa is saying, ‘Hey, we're sorry that your son ran up $500 in in-app purchases in Madden or that you forgot to unsubscribe from that streaming service that you meant to quit a year ago, but we're not going to refund those types of charges anymore’," says Schulz of Lending Tree.
Although it’s meant to stop chargeback abuse, the change could make it harder for consumers to win disputes for some fraudulent charges. That’s because it allows merchants to provide additional evidence that a disputed purchase was legitimate and authorized—such as a customer using the same payment credential previously used at a merchant, account login credentials or proof of use of a product.
Given that merchants will be able to use that sort of evidence, it raises the question whether cardholders who have created online accounts for retail services and linked Visa credit cards to those accounts could find it difficult to win disputes if hackers steal their login credentials and use linked credit cards to make purchases.
What you can do
To lower the possibility of having to file a chargeback with your credit card issuer because a merchant won’t provide a refund, find out what a retailer’s refund policy is before making a purchase. If a retailer doesn’t offer refunds or only offers them in limited circumstances, consider taking your business elsewhere.
To reduce the risk of having to file a chargeback for fraudulent transactions on your accounts, take the following steps.
- When you shop online, don’t use the option that some retailers offer to save your credit card information for quicker checkout. This will only make it easier for hackers to use a card you’ve previously used to make fraudulent purchases.
- Log onto your bank and credit card accounts to set up alerts to receive notifications about transactions on your account, which can help you quickly spot suspicious transactions. Better yet, take advantage of a service such as Carefull. Carefull can monitor all of your bank and credit card accounts 24/7 and alert you to unusual activity and signs of fraud—and even money mistakes, such as recurring subscriptions you’ve forgotten to cancel.
- Create strong passwords with upper- and lowercase letters, numbers and symbols for all of your online accounts to make it harder for hackers to access them. To make it easier to keep track of your passwords, use a password manager such as the one offered as part of Carefull’s Vault feature.
- Find out if your accounts have been compromised in a data breach by using a free service such as Carefull’s Radar scan. Be sure to change the passwords for any accounts that are impacted by a breach.
- If you do need to file a chargeback to dispute a fraudulent charge or a legitimate billing error, follow the process detailed above (notifying the card issuer immediately and following up in writing with evidence) to increase your chances of winning a dispute.
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