123chargeback/Blog/What is a Credit Card Chargeback and How Does it Work?

What is a Credit Card Chargeback and How Does it Work?

bank chargeback

How often do you receive a bank’s message about questionable purchases from your credit card? If this happened even once, then we hope that you made a bank chargeback. If you didn’t know that this is possible or the procedure of chargeback a credit card, then we will be happy to tell you all secrets. However, is everything so simple with this procedure? Is it easy to prove that chargeback on a credit card will be legal? You will find answers to all your questions in our article.

What is a chargeback on a credit card and its purposes?

If, after paying for something by credit card, the party who paid can declare to their bank that the payment is disputed it is a credit chargeback. The bank freezes the amount that is transferred to the reserve. This means that the money is not returned to the card, but it is not transferred to another account until the bank clarifies all the circumstances. As statistics show, credit card chargebacks always occur more often if it is impossible to cancel the subscription and the funds were withdrawn from the credit card.

What are the main purposes of a chargeback credit card?

A chargeback credit card is often confused with a buyer’s orders from a completed transaction. For example, if the buyer paid for the product but decided that he/she no longer needs it, then a buyer needs to contact the seller and not the bank. The choice of the seller is decisive. In case of a return, it is not, you need to rely on the investigation of the bank. Therefore, the purposes of the chargeback are important to determine whatever the circumstances:

  • Possibility of protection from malevolent sellers;
  • It makes the deal between the seller and the buyer more transparent. That is, the absence of additional conditions is beneficial to only one side.
  • Protecting consumers from credit card fraud.

When you can answer the questions: “What is a credit card chargeback? And how to define it due to purposes?” It is important to remember that there is no need to return the item to the seller upon a chargeback bank.

How to chargeback on a credit card?

credit card chargebacks

Each payment system has its own chargeback rules. However, on average, this process takes 60-90 days. To speed up the process, you need to immediately contact the bank with a corresponding request and provide all the necessary information.

How to chargeback credit card: general process

This algorithm of actions is universal for most payment systems.

  1. Presumably, you buy something offline or online by paying with a credit card.
  2. Immediately after the alleged purchase or while viewing your credit card statement, you notice a questionable charge. Then a chargeback is initiated due to credit card chargeback rules. On average, no more than 45-180 days should elapse from the date of payment.
  3. The bank has the right to contact the seller to whose account the money was received and demand proof that the transaction was valid and legal.
  4. The bank takes time to decide on the legality of the transaction. This is usually the optimal timeframe established by the bank’s policy.
  5. The bank informs the client about its decision. If it is deemed invalid, then the money will be returned. Otherwise, the client still has a chance to challenge the decision.
  6. Not required but the final step in the process. Challenging the bank’s decision in an arbitration process that is regulated by the credit card company.

Important! If the seller loses in the arbitration process, he can go to court with recourse and compensation at his own expense.

Visa rules and regulations for chargebacks

The main aspects of the process are identical to those described above. The visa payment system has no more than 30 days to examine the evidence of the parties and make a decision. An incorrect understanding of visa chargeback rules can have an impact on retailer revenue. Since 2018 the Visa chargeback policy was changed and now according to rules all previous reasons for bank chargeback have been grouped into four basic dispute categories.

Such dispute categories are:

  • Fraud;
  • Authorization;
  • Processing Errors;
  • Customer Disputes.

US bank chargeback

The US Bank first provides the opportunity to independently resolve a dispute between a buyer and a seller in good faith. In case of failure of negotiations or difficulties that appear, the client can contact the bank by filling out a special form on the bank’s website, attaching an application. You can also submit a request through the bank’s mobile application.

The causes of bank chargeback

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Credit card chargebacks are a great way to combat fraud, but at the same time harm the business through frequent customer calls. Therefore, many companies take measures to prevent victory in such a dispute. However, let’s look at the causes of a bank chargeback.

The consumer has not canceled the subscription

When you use the service regularly, the automatic monthly payment feature is very convenient. However, if the consumer has forgotten or for some other reason was unable to cancel the subscription, then a dispute may arise. The statistics show that companies that notify about early payment for the next month are more likely to win cases. This reminder allows you to not renew your subscription.

You paid for a non-existent purchase

This is a sign of fraud, and both the buyer and the consumer can suffer. Therefore, we recommend that you shop on verified web pages and do not tie credit cards to stores. Otherwise, scammers can get your credit information.

Credit not processed a chargeback

The only important thing is the return of the goods or the failure to use the service, for which the seller must return the money or credit. However, if you do not receive either one or the other, you must call the bank on the official phone number and initiate a chargeback on a credit card.

Important! Chargeback credit score will not affect your overall credit history. The only difficulty may arise during the proceedings since it will be difficult to knit a new loan. When you know how to do a credit card chargeback, you can apply your theoretical knowledge in practice if such a situation arises. Sometimes, no matter how careful a person is in their banking operations, not everything depends on him. In such cases, the only way out is to know the opportunity to defend your rights and money. Thank you for reading the article to the end, we are glad to be useful for you. See you soon on the pages of our blog!

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Author of article

Tatiana Sharapova

Interests: music, finance, cinema, art

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