How Does a Credit Card Chargeback Work?
As a credit card holder, you can go your entire life without hearing the word "chargeback." However, over the course of using your card you will likely have implemented your share. A chargeback is the process by which you dispute or reverse charges on your card -- a process merchants fear.
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Chargeback Basics
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A chargeback happens when a credit card holder disputes a charge on his credit card account. This is a process designed to protect the holder from fraudulent charges or processing errors. Some common reasons for chargebacks include billing errors, duplicate charges, fraudulent or otherwise unauthorized transactions or for unsatisfactory delivery of what was purchased. To begin a chargeback, a credit card holder contacts his card company and follows its procedure for reversing a charge.
Chargeback Proces
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A credit card holder begins a chargeback by reporting the time, date and details of the transaction he wants to dispute. He will also report his reason for a dispute. The credit card company then compares the reason for the dispute to its policies for chargebacks. If he meets the company dispute requirements, the credit card company will withdraw the disputed amount from its account with the merchant in question. Depending on the service contract, this can be an actual debit from the account, or it can be a reduction in its next payment to the merchant.
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Chargeback Fees
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Most credit card companies do not charge their card holders for conducting a chargeback. However, they sometimes will charge a fee -- often a percentage of the total -- from the merchant they have to charge the money back from. Also, the merchant service company will usually charge an additional fee. Merchant service companies act as middle-men between the merchant and the credit card companies. Their charges are often comparable to the charge for conducting the transaction in the first place -- usually expressed as a small flat fee plus a percentage of the transaction's value.
Chargeback Law
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The Fair Credit Billing Act states that you may request a chargeback within 60 days of the date of the transaction, provided you make the request in writing. This is one of many reasons to review your credit card statements carefully every month. Debit cards are excluded by law from eligibility for chargebacks. This is because of the nature of debit card transactions. Debit cards draw directly from your personal account, and thus you need to wait for a refund rather than a credit chargeback.
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References
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