When you pay for goods and services with a debit or credit card, you have greater consumer protection than paying with cash thanks to something called a ‘chargeback’. It can enable you to get your money back if something goes wrong with a purchase, which can be all but impossible when paying disreputable sellers in cash. Here’s what you need to know.
What is the chargeback scheme?
It’s a voluntary scheme signed up to by card operators American Express, Maestro, MasterCard and Visa that helps you get your money back if something goes wrong with a purchase. That includes things like an item failing to arrive after being ordered online, or it not being as described by the seller.
It’s similar to the protection provided to credit card customers by Section 75 of the Consumer Credit Act, which legally obliges credit card companies to refund purchases of more than £100 up to a maximum of £30,000 should something go wrong with a purchase.
» MORE: Section 75: credit card protection explained
How a chargeback works
The chargeback scheme enables customers to claim for a refund on purchases of any amount of money that were made on debit, credit or prepaid cards should something go wrong. There is no minimum or maximum spend, unlike Section 75 protection.
How long does a chargeback take?
You usually have up to 45 or 120 days to make your claim, depending on the card provider. And once the card company receives your claim, it will investigate and try to give you your money back by reversing the transaction you made from your card to the seller.
You’ll only get your money back after the card company does and there’s no time limit. But if you’re not happy with the card company’s response or you do not receive any update after eight weeks, you can complain to the Financial Ombudsman Service, which can make the company respond.
Can you chargeback friends and family?
If you mistakenly transferred money to friends, family or any other bank account for that matter, the chargeback scheme can’t help you. But something else can. It’s called the ‘misdirected payments’ code.
Again, unlike Section 75 of the Consumer Credit Act, which is a legal obligation to protect purchases made on credit cards, the misdirected payments code is simply a voluntary code of practice that some banks and card companies have signed up to. There’s no guarantee you’ll get your money back.
But the process should work like this: once you’ve realised you’ve paid money into the wrong account and notified your bank or card provider, it should take action within two working days. As long as the other party doesn’t dispute the mistaken transfer, you’ll get your money back quickly.
However, there’s nothing the bank can do if the money has been spent by the account holder and they don’t have enough in their account to repay it. In this situation, or in the event of a dispute being lodged, your only alternative may be to take the other party to court.
Are there risks with chargebacks?
There’s no risk to card holders when making a claim for a chargeback in terms of credit score or it affecting your relationship with your bank or card provider. However, businesses may have to pay a fee if they’re subject to a chargeback.
Can my chargeback dispute be denied?
Yes, the seller you made your purchase from can dispute a chargeback. Your bank will investigate the matter and if it sides with the seller, you won’t be refunded. However, if you are unhappy with how your bank or card provider treats you, you can make a complaint to the Financial Ombudsman Service which can overrule your provider’s decision on your claim.
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