What Is A Chargeback On A Credit Card?

Everyone with a credit card has had an unfamiliar charge on their credit card statement. Alternatively, you may have been charged for something you never received or a subscription you thought you’d cancelled.

Sometimes, these unwanted charges will lead to a dispute, resulting in you requesting a chargeback.

What is a chargeback on a credit card?

A chargeback on a credit card is like a refund in that the ultimate goal as the cardholder is to get your money back.

Consumers obtain credit cards through a provider — usually a bank, credit union or an airline — but the card network (Visa, Mastercard or American Express) operates the payment system. These two types of credit card companies must work together to get your money back from a disputed transaction. That process starts with your provider applying to the card network to reverse the charge on the card, otherwise known as a chargeback.

However, you may be able to get a refund from the merchant before you go down the chargeback path. Two examples of chargebacks include being charged extra months for a cancelled online subscription or waiting to be reimbursed for a cancelled flight.

Chargeback vs dispute

The terms chargeback and dispute are also often used interchangeably in the credit card process, but a dispute is only the first step. If your provider agrees with the dispute, they will attempt to get your money back through a chargeback.

So, all chargebacks start as a dispute, but not all disputes end up as chargebacks.

» MORE: 9 things to know before getting your first credit card

When you can request a chargeback on a credit card

Each of the three card networks has different rules regarding when a customer can seek a refund through a chargeback. There could be any number of reasons why a consumer may request a chargeback from a merchant.

Common reasons may include:

The card wasn’t valid at the time of the transaction.
You never received the goods and services you purchased.
You don’t recognise the transaction.
You cancelled a periodic payment, but the vendor continues to debit your account.
You already paid for the goods and services; they’ve charged you again.
A merchant promised you a credit, but it was not honoured.
The goods and services purchased were not defective or not as described
A merchant charged you the wrong amount.
A business promised you a refund after returning a product, but it didn’t arrive.
The transaction amount wasn’t authorised.
Goods or services delivered to you outside of an agreed-upon timeframe.
Thieves used your stolen credit card to make fraudulent transactions.

» MORE: How to spot and avoid credit card scams

How the chargeback process works

Before alerting your card provider, try resolving the issue with the merchant first. Visa, Mastercard and American Express require proof that you attempt a resolution before agreeing to a chargeback.

As the cardholder, your request will go through your provider, who can give you all the information you require for the request, such as whether a chargeback is available with your network for the disputed transaction in the first place. They will then make the request on your behalf.

If they decide you have a valid case, they will notify the merchant’s bank that you request a chargeback. However, each network has distinct rules regarding when chargebacks are applicable. If your provider decides your request does not fall within those boundaries, they are not required to seek a chargeback.

Once your provider lodges a chargeback request, the merchant’s bank can decide whether to accept it and refund you, but they can also reject it if they believe the request is invalid. They may, for example, believe that the goods delivered were, in fact, as described in an advertisement at the time of the purchase.

Before they put in a request, your provider should have all the necessary information — such as when the goods arrived and if they weren’t what you purchased, for example, or if they never arrived at all. Your provider will have a record of when and where you paid for a transaction and for how much. You’ll also need to inform them if you believe you were overcharged or that you’ve made repeated attempts unsuccessfully to cancel a subscription.

Once they’ve established that your claim falls within the card network’s policy parameters, your provider must claim a chargeback.

What to do if your chargeback request gets rejected

The success of your chargeback request will depend on the terms and conditions of your network, as discussed. Sometimes, they will offer a partial chargeback. For example, if you bought a travel package involving flights and accommodation, but one or two flights were cancelled. Or, if the concert you bought tickets to gets postponed and you can’t attend on the new date.

There is no urgency regarding chargebacks. Though, you shouldn’t wait too long if you don’t get any response from the merchant. Visa, Mastercard and American Express cardholders all have a 120-day limit for chargeback requests. Under some circumstances, this may extend to 540 days, such as when contacting and corresponding with the merchant is difficult.

The card network’s decision is final, though if you are unhappy with your card provider’s response, you can complain to the Australian Financial Complaints Authority (AFCA) if, for example, you believe that they didn’t try hard enough to obtain your chargeback.