Credit card chargebacks: What are they and how do they work?

If a charge shows up that you don’t recognize because of merchant error or fraud, you can work with your creditor to get the money back. You may even be able to get a refund if you received a product or service that didn’t live up to your expectations.

That’s because of the Fair Credit Billing Act (FCBA), which states that customers who are incorrectly charged have the right to request a credit card chargeback for no additional fee and receive a statement credit if the charge is found to be an error.  

What is a credit card chargeback?

A credit card chargeback is a charge that’s refunded to you after you successfully dispute a credit card transaction.

When you discover an unauthorized or incorrect charge on your credit card statement, you can contact your credit card issuer to initiate a chargeback. The issuer is required to investigate your claim and, if they determine it’s valid, you can receive a credit for the transaction — including any shipping and handling fees and taxes.

Chargeback vs. refund: What’s the difference?

Chargeback and refunds can both give you money back after a transaction, but a refund comes directly from the merchant while a chargeback comes from the card issuer.

If you receive a faulty product or service, or if you don’t receive what you purchased at all, you can contact the merchant directly to request a refund. If the merchant doesn’t agree to your request, you can dispute the charge through your creditor and request a chargeback. 

How credit card chargebacks work

For fraudulent charges, there is no time limit. If you are requesting a chargeback due to a subpar product or service, then the chargeback must be requested within 60 days from when a creditor sends you a bill. You can make the request, even if you’ve already paid for the charge. Requests can usually be submitted to a creditor online, by phone or email.

Once you submit a chargeback request, the credit card issuer has 90 days to contact the merchant and investigate the details of the transaction. During this time the creditor may issue you a temporary refund, but you will still need to pay any other credit card balance that comes due.

If the creditor determines you’re not responsible, your refund or account credit will be permanent. If you are found responsible, you won’t receive the money back for the transaction.

Your hotel is not what you expected? Here’s what you need to know about getting a refund.

Can a merchant fight a chargeback?

A merchant can choose whether or not to fight a chargeback. If the merchant chooses to fight, they can provide your creditor with documents to try and prove you received what was purchased, like a product photo or a signed delivery receipt. If the merchant is successful, your chargeback request will be denied and you’ll have to pay for the transaction. 

Common reasons for a credit card chargeback

Online shopping is often connected to chargebacks since customers don’t get to inspect the products before buying. But buying a sub-standard item online isn’t the only instance where you might need a chargeback. Here are some of the main reasons you can submit a chargeback request:

• Fraudulent charge: Your credit card or credit card number is used to make a transaction without your permission.
• Charge by error: A merchant double charges you or charges the incorrect amount.
• Product or service issues: You don’t receive what you paid for, or the product/service is unsatisfactory and the merchant refuses to give you a refund.
• Deceptive charge: You’re charged hidden fees or you receive unauthorized recurring charges for subscriptions.

How to request a chargeback

Each creditor has their own process, but here’s a general overview of how to request a credit card chargeback:

1. Contact the credit card issuer online or by phone to advise them of the transaction right away.
2. If necessary, follow up with documentation and/or a formal dispute letter.
3. Wait to receive the creditor’s decision (within 90 days).
4. If your request is successful, check your account to make sure you receive the full credit or refund.

Merchant rights for credit card chargebacks

Merchants are only successful at preventing about 12% of chargebacks, but there are laws that can help them respond to unfair requests.

If a customer requests a chargeback because they don’t want to pay for something they received, for example, it can be considered chargeback fraud or refund fraud. The merchant can use a process called “chargeback representment” to contest the customer’s request, and may even pursue a lawsuit or file a police report in cases of suspected fraud.

Frequently asked questions (FAQs)