Credit Card Chargebacks: How to Help Customers with Disputed Transactions

Sometimes it happens that you make an online purchase using your credit card and the product never arrives, or the product arrives but isn’t what you expected. In such a situation, have you ever encountered a situation where the merchant refused to cooperate with the refund? Don’t worry, you can file a chargeback with your credit card issuing bank. If your claim is legitimate, the bank will reverse the transaction. In this article, we will learn what a credit card chargeback is, the scenarios for submitting a chargeback, and the steps to do so.

What is a credit card chargeback?

A credit card chargeback is the process by which a customer disputes a transaction on their account with a merchant and seeks a reversal. For example, Paresh ordered headphones from a merchant. When the products arrived, Paresh realized they didn’t work properly. But the merchant refused to return the headphones and gave them a refund.

Paresh filed a chargeback request with the bank that issued his credit card. The bank was satisfied with Paresh’s claim and reversed the transaction. Therefore, chargebacks are a powerful protection tool for credit card holders against merchants in legitimate situations where merchants are uncooperative.

Cases where a refund is requested

There are a number of situations where credit card customers may need to file a chargeback with their card-issuing bank. Some of them include the following.

1. Unauthorized or fraudulent transactions occur on a credit card without the cardholder’s consent.
2. The cardholder has paid for a product or service but has not yet received it.
3. The cardholder did not receive the requested product or service. Some items may be missing, or may not be of the expected quality, or the wrong item may be sent.
4. The billed amount is wrong or has been billed twice.
5. The cardholder has canceled the subscription but is still charged
6. The cardholder has returned the item but has not received a refund
7. The cardholder cannot recognize the transaction that appears on the credit card account

Parties involved in refunds

Before we get into the refund process, let’s first understand the parties involved. These include:

Credit card holder: is the person holding the credit card, i.e. you

merchant:Business owners who sell goods or services to you

Card issuing bank: The bank that issued your credit card is your bank. Some of the well-known credit card issuers in India include HDFC Bank, Axis Bank, ICICI Bank, American Express, SBI Cards, etc.

Acquiring bank: The bank that collects payments on behalf of the merchant

Payment gateway: The party making the credit card payment for the disputed transaction. In India, some of the well-known payment gateways include Razorpay, Cashfree, etc.

Card network/association: Credit card issuing network. Some of the well-known credit card networks in India include Visa, Mastercard, Rupay, American Express, Diners, etc.

The process of filing a refund with the bank

If the dispute involves products or services you ordered from the merchant, you should first raise it directly with the merchant. The merchant can agree to a replacement or refund. Contacting the merchant directly can help you resolve your issue quickly. If the merchant has objections to your request, you can file a refund request with the bank.

Now let’s look at the process of filing a chargeback with your bank.

1. Contact the customer service department of the bank that issued your credit card and file a chargeback request. Some banks may accept refund requests over the phone or via email, while others require you to fill out a specific refund form.
2. When making a chargeback request, you must share all necessary information with the card-issuing bank. It may include copies of invoices, disputes related to communications with merchants, etc. This means you won’t have to pay the disputed amount until the card issuer completes its investigation.
3. The issuing bank will pass the message to the acquiring bank. The acquiring bank will contact the merchant regarding the refund. The merchant can accept or challenge the claim.
4. If the merchant accepts the claim, the acquiring bank will debit the merchant’s bank account and transfer the money to the customer. If the merchant disputes the claim, they will submit a rebuttal letter along with the details needed to deny the customer’s claim.
5. The merchant’s response details will be shared with the credit card issuer’s bank. The card-issuing bank will then decide on the customer’s chargeback request. If the card-issuing bank rejects the chargeback, the provisional credit extended to the customer will be revoked. The customer must then pay the refund amount on their monthly bill.

It should be noted that customers must submit a chargeback request to the card-issuing bank within the number of days specified on the credit card statement (usually 60 days). Once a chargeback request is made, the entire investigation may take four to eight weeks to complete.

If a merchant frequently experiences chargebacks, it will have a negative impact on its reputation. Frequent chargebacks may arouse suspicion of the merchant. If frequent chargebacks go against the acquiring bank, the acquiring bank may penalize the merchant or even terminate its account.

Chargebacks are a powerful customer protection tool

Customers have a variety of payment methods when making payments for online transactions. These include credit cards, debit cards, net banking, UPI, wallets, gift certificates, cash on delivery, etc.

However, when paying with a card, if the merchant does not cooperate, the customer can file a chargeback with the bank. Therefore, chargebacks are a powerful protection tool that customers can use to protect themselves.

Gopal Gidwani is a freelance personal finance content writer with over 15 years of experience. You can contact him via LinkedIn.