What is a Chargeback on a Credit Card and What are the Long-Term Ramifications?
Merchants all over the world are currently fighting for your attention. As a credit cardholder, you have great power and influence over the eCommerce environment. Business owners are grateful for your patronage because they understand your options are virtually limitless.
However, there is one aspect of credit card ownership that you may not fully understand—an issue that merchants (large or small) are desperate for you to recognize because your seemingly-insignificant actions are impacting the economy in a big way.
Here is what everyone wants you to know…
When it comes to credit and debit card purchases, an illegitimate or unwarranted chargeback is basically the equivalent of cyber-shoplifting.
What is a Chargeback on a Credit Card Purchase?
Most consumers don’t even know what a chargeback is, but they are likely familiar with what it does.
A chargeback is a bank-initiated refund for a credit card purchase. Rather than request a refund from the merchant who facilitated the purchase, cardholders can contact their bank and request a chargeback by disputing a particular transaction.
Chargebacks are a critical consumer protection mechanism. When credit cards were invented, government officials agreed that it was essential for cardholders to have a fallback option if they encountered a fraudulent business that scammed shoppers out of their money.
It is also necessary for cardholders to retrieve money lost to criminals, fraudsters, hackers, and other unauthorized purchases.
While there are legitimate reasons for requesting a chargeback, many consumers aren’t using the process correctly.
Chargebacks On Credit Card Purchases: Dos and Don’ts
Before requesting a chargeback, be sure you understand the “dos” and “don’ts.”
Proper Use of Chargebacks
Cardholders can request a chargeback if they’ve legitimately suffered at the hands of a fraudster.
For example, if a merchant makes it impossible to request a traditional refund (by not displaying contact information or failing to acknowledge your requests), a chargeback might be the only option available.
Legitimate cases of fraud, where a criminal has gained access to your personal information, is another valid reason for a chargeback.
However, in both these situations, there are advantages to not filing a chargeback, even if it is warranted. The chargeback cycle can be very time consuming. Additionally, it could take several months for a refund to be awarded.
If the merchant makes it impossible to request a traditional refund, there is another option besides a chargeback. You can contact eConsumer Services®, a mediation firm that will secure a refund on your behalf.
Ultimately, filing a chargeback should be your absolute last resort. Only contact the bank if you have no other options available.
Improper Use of Chargebacks
Chargebacks are often used for illegitimate reasons. For example:
- Contacting the bank seems like an easy alternative. Few people relish the idea of dealing with a business’s customer service department. If filing a chargeback seems like a quicker and easier option, it might be tempting to try it out. In reality though, merchants will typically want to retain your business and loyalty by doing all they can to resolve the issue quickly and to your satisfaction.
- Buyer’s remorse sets in. This occurs when the consumer regrets making a purchase, but doesn’t want to return the merchandise or cancel the service. If you keep the merchandise and get a refund, that is actually shoplifting.
- A family member bought something without your knowledge. Even if you didn’t know about the purchase, the shopper did consent to the transaction. Therefore, you shouldn’t call the bank and say it was unauthorized.
- You’re confused about the different refund options and their outcomes. Some illegitimate chargebacks are actually just a result of a misunderstanding. The only way the bank can refund your money is to initiate a chargeback. They can’t cancel your magazine subscription or tell you the exact product you purchased. If you have questions or want your money back, call the merchant.
- You don’t remember making the purchase. It’s easy to forget one particular transaction, especially if you make a lot of purchases in a short period of time. However, if there is doubt about a transaction, it’s important to contact the merchant directly. A phone number or email address should be listed on your credit card statement. A quick inquiry will tell you everything you need to know.
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What Happens When Chargebacks are Issued?
Each time a chargeback is filed, both the consumer and merchant suffer. The potential negative impacts of a chargeback include:
- The merchant must pay an expensive, non-refundable fee for each chargeback issued. Even if you later realize the chargeback was filed in error or the merchant helps you better understand your initial obligations, the damage has already been done.
- If a business receives too many chargebacks, the bank will revoke the merchant’s ability to process credit card payments. Unable to accept credit cards, the business will likely be forced to close. Your actions could be directly responsible for the destruction of a business.
- Some businesses take a stance against chargebacks. Take Sony, for example. If a PlayStation® user files a chargeback, the company will terminate the player’s account and ban the creation of another.
- Because of increased costs brought about by chargebacks, merchants are forced to raise their prices — meaning you pay more.
- If the merchant chooses to dispute the chargeback (a right granted to businesses by Mastercard, Visa, American Express, etc.), there is a chance the chargeback will be overturned. That means you’ll be charged for the original transaction a second time. The bank that issued your credit card might charge you an administrative fee if the chargeback dispute is found in the merchant’s favor.
- If the bank suspects you’re filling illegitimate chargebacks as a means of cyber- shoplifting, your account will likely be closed. If your account is closed, your credit score will drop.
Being a Responsible Cardholder
As a cardholder, it is your responsibility to ensure your account is being used ethically and honestly.
- If you don’t recognize a charge on your account, first consult family members and anyone else with access to the card. Was the charge authorized by someone without your knowledge? You should also contact the merchant in question (name and phone or email should be listed on your statement) to verify the purchase and obtain additional information. It’s possible that you simply don’t recognize the business name or have forgotten a purchase. Don’t automatically assume fraud has transpired.
- Read the terms and conditions carefully before buying anything. Don’t click “accept” if you don’t actually agree to the policies. Before requesting a chargeback, double check what you originally agreed to.
- Cancel services long before the next billing cycle hits. Give the merchant plenty of time to terminate your agreement; this could take a while, so don’t expect to avoid a charge by reaching out the day before.
- Give the merchant a sufficient amount of time to initiate a refund before assuming fraud has transpired.
- Decrease your fraud risk by adhering to credit card ownership best practices: don’t let anyone borrow your card, keep personal information safe, and shop on HTTPS sites with a secure WIFI connection. It’s also recommend that consumers sign up for services like Mastercard SecureCode and Verified by Visa.
On behalf of all eCommerce merchants everywhere, Chargebacks911® has brought you this public service announcement: please don’t abuse the chargeback process! Remember, a chargeback on credit card purchases should be used as a last resort and your actions have severe consequences for everyone involved — including you!
If you’d like help securing a refund for a credit card purchase, visit eConsumer Services®.com.