Chargeback schemes can help consumers - that's you - get what they paid for.
In this guide we look at when debit and credit cards are covered and how cardholders can make a claim.
What chargeback can do
Chargeback is a process that allows debit and credit card holders to reverse transactions when there is a problem with the goods or services they've purchased using their cards.
Card issuers like Visa, Mastercard and American Express run the process so that it applies to any card with their logo: credit, debit and even prepaid.
Consumers can ask their card provider - usually a bank or building society - to try and recover all or part of the money they've paid, provided that there is evidence of a breach of contract.
So, for example:
- The cardholder has bought a TV. As soon as they got it home they realised it had a serious electrical fault but the retailer refuses to help.
- The cardholder ordered an item online but it never arrived and the retailer refuses to refund the cost.
- The cardholder was overcharged for an item due to a technical fault .
- The cardholder looks at their statement and sees that there's been a clerical error. the account was debited twice for one purchase.
- There's an unexplained and possibly fraudulent charge to the account.
Simply put: it's a way to get your money back
Simply put, chargeback can get consumers their money back when other attempts have failed or are unsuitable.
As you can see from the examples above and below, it's most likely to be applicable in situations where a retailer refuses to admit fault.
Mr A hired a van in order to move house. He agreed a fee of £179.99 and paid over the phone with a debit card.
When his statement came Mr A discovered that the van hire company had taken £628.81 from his account.
Unable to resolve the issue, he initiated a chargeback and, after an investigation,
got back the money he was overcharged.
What it can't do
However, chargeback isn't a silver bullet for disputes with retailers.
As we'll see in the next section, cardholders can't enter into the process until they've already exhausted other options.
Even then, the card issuer must be satisfied that the claim meets the specific conditions of their chargeback scheme.
Card companies are not legally liable to retrieve money and are bound only by scheme rules, which participating card providers have voluntarily agreed to.
In that sense, chargeback is closer to the purchase or delivery protection policies offered by credit card providers than it is to consumer protection under law .
Making a claim
With that caveat, let's look at how to make a claim under a chargeback scheme.
1. Exhaust other options
In some cases - for example, when a clerical error has caused an account to be debited twice for one purchase - chargeback is the next logical step.
When it comes to disputes with retailers, however, it's better viewed as a last resort.
Only where the cardholder can demonstrate that the dispute is intractable and that they are entitled to be refunded under existing consumer law will card issuers find in their favour.
Banks use what is known as a 'reason code' to decide whether each chargeback claim is legitimate. If a reason code's criteria are not met, the chargeback will not be processed.
For example, reason code 53 relates to goods that are 'not as described or defective'.
In this case, a cardholder must, "attempt to return the merchandise or resolve the dispute before contacting his bank."
2. Check the time limit
It's important not to push informal resolution too far, though, because the chargeback process can only be initiated within a fairly short time period.
The Financial Ombudsman Service says that the time limits between card providers vary from between 40 and 180 days from the date of transaction.
Here are the limits that apply to the three biggest issuers: