Think You Won Your Credit Card Dispute? Not So Fast

A chargeback occurs when you successfully dispute a charge on your credit card. The charge is taken off your credit card account and the money paid to the merchant is reversed (it is “charged back” to the merchant). Many people dispute credit card charges for services not rendered. In fact, COVID-19 has led to an increase in chargebacks as many companies struggled to keep up with demand.

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A chargeback can be a powerful tool for consumers that do not receive the good or services they paid for, but it’s no guarantee you won’t have to pay. Even if the credit card company sides with you, the merchant may not—and they may try to collect. Before you start celebrating, take a moment to consider what happens after you dispute a credit card charge.

In This Piece

What Happens When You Dispute a Charge

The Truth in Lending Act is the federal law that gives consumers the legal right to dispute credit card charges if there is a billing error, which includes when property or services are not delivered to the consumer as agreed. That law spells out card issuer’s responsibilities when cardholders file disputes.

When you dispute a charge with your credit card company, it must conduct what the law calls a “reasonable investigation” to determine if the charge was correct or not. It must also present you with a result of the investigation within 90 days.

During that process, the credit card company typically reaches out to the merchant that issued the charge. It requests documentation from the merchant regarding the transaction in question, and the merchant may be able to state its case for why the charge was correct.

If the credit card company sides with you, it removes the charge from your credit card statement and you do not need to pay the charge on your credit card.

Can a Merchant Try to Collect the Money from You After a Chargeback?

The Truth in Lending Act covers your right to dispute a credit card charge. It also lays out your credit card company’s obligations when you do. It doesn’t, however, say what merchants have to do. And it doesn’t specifically prohibit a merchant from trying to collect the money from you later. Instead, how merchants respond to credit card disputes is spelled out in the merchant agreements they sign when they agree to accept credit cards for payment.

A chargeback means only that the credit card company decides in your favor regarding the dispute. It doesn’t mean the merchant agrees. It doesn’t even mean you don’t owe the money.

Merchants can engage in “chargeback representment” to challenge your chargeback request and prove the original payment was valid. This process can be challenging, and merchants must decide if the potential loss of revenue is worth it—or if they might lose consumer trust with an aggressive approach without evidence.

The merchant might also seek to recover its loss by invoicing you for the charges. If you don’t pay, it might threaten collections activity or even sue you. Typically, this is something that’s likelier to happen when higher dollar values are in dispute.

Merchants can engage in representment and debt collection procedures at the same time. In both cases, you might need to remake your case for why you don’t think you owe the debt. Be prepared to do the following:

  • Prove you didn’t receive the services or goods as agreed
  • Demonstrate the goods or services were below the quality the merchant agreed to provide
  • Provide documentation you returned the items to the merchant

Tips and FAQs for Avoiding Future Problems with Credit Card Disputes

No one wants to deal with an issue only to have it pop up unexpectedly in the future—especially a financial issue that could take a toll on your credit score. Here are some tips to avoid future issues when you request a chargeback.

Dispute credit card charges only if you have a legitimate reason.

Unfortunately, some people request chargebacks even if they received the goods or service in question. They might do so because they have a problem with the vendor or simply so they don’t have to pay for the products. That last one is fraud, and it could lead to your credit card account being closed or other legal consequences.

Reach out to the vendor first.

Before you file a chargeback, give the merchant a chance to make the issue right first. Many are willing to work with you and might refund the money, offer an exchange, or work to make a service right. As part of your chargeback process, you’ll want to demonstrate that you attempted to contact the merchant about the issue. If you file a chargeback without working with the vendor first, you give the vendor more potential leeway to make a case that you do still owe the money.

Act quickly.

You must dispute a credit card charge in writing. The letter should reach the credit card company within 60 days of the first bill or statement with the error on it. That makes reviewing your credit card statement regularly a critical step.

Keep an eye on your account.

According to the Federal Trade Commission, you can withhold payment for disputed charges while the investigation is underway. Your credit card company can’t penalize you with late fees, interest, or reports to the credit bureaus regarding nonpayment of those charges. That doesn’t, however, extend to your account in general. You must otherwise keep it current or face those kinds of consequences. 

But if you do pay your credit card charges and then realize something isn’t right, you can dispute it. A decision in your favor might result in a credit to your account.

Save the documentation.

Don’t toss receipts, emails, or other evidence just because the chargeback occurred. You might need the documentation again if the merchant decides to try to collect from you. Typically, the higher the amount in question, the more important it is to maintain your documentation.

Protect Your Wallet and Your Credit

Protecting your wallet as well as your overall financial health does require some work. In addition to reviewing all of your statements regularly, ensure you’re familiar with the laws that protect you and how you can assert your rights. 

If your credit is dinged by any type of inaccurate negative reporting—whether it’s related to a chargeback collection or not—understand how you can work to repair your credit. One way to help protect yourself is to stay on top of your credit and invest in products and services that let you easily monitor your credit, such as ExtraCredit.

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