Here’s why you should never report a credit card charge as fraudulent when it isn’t

Philip Paul comes down with a serious case of buyer’s remorse after he signs a contract with the Palladium Travel Club. Surprisingly, the company agrees to release him from the deal — which makes Paul’s next move so perplexing.

Question: While visiting Mexico, I signed a contract to join The Palladium Travel Club. Even before I returned home, I decided that I wanted to cancel. The supervisor told me that they agreed to refund my deposit that I made with my Visa.

They have sent me proof from their bank that they have refunded the money, but I have not seen the refund, nor has my bank. They say the refund was processed and there is nothing else they can do to trace the refund through Visa.

My bank can’t help since there is not a transaction on their side to track. I would like to see my money returned without going to court. I have been trying to get this resolved for months, but no one seems to be able to help. Can you? Philip Paul, Pewaukee, Wis.

Answer: When I first read your complaint, I thought it would be an easy one to resolve. You had charged the deposit to your credit card, and you had proof that the company refunded your deposit. Your credit card company should be able to help.

But you told me that your bank has already informed you that it could not help you.

Something was not adding up here.

I did a little more digging and found that you had actually filed a fraudulent charge claim for the entire amount of $4,600 after The Palladium Travel Club had agreed to void your contract and refund your money.

Related story:   I had to pay twice for my flights to Mexico

The Fair Credit Billing Act (FCBA) was created to protect consumers against credit card billing errors. This act provides consumers with the ability to initiate a chargeback, and it forces credit card companies to investigate billing errors on statements.

You had signed an official declaration from your bank attesting that this charge from The Palladium Travel Club was fraudulent — but it wasn’t.

You had freely signed the contract, but later changed your mind. This would not be considered a billing error or a fraudulent charge.

When your credit card company reached out to the Palladium Travel Club, the company was obliged to defend itself against a claim that it had charged your credit card in a fraudulent way. It provided the proof that you had signed a contract and used your credit card to pay the deposit for your purchase.

After an investigation of your claim, your credit card company informed you that you had lost the case and that it was resolved in favor of The Palladium Travel Club. It also pointed out
that this was not a fraudulent charge case:

When you initially filed this claim you advised that it was fraud. The merchant denied the claim because a relationship existed between you and the merchant. Your claim was invalid. You will be financially responsible for this transaction, and your dispute is now closed.

Thus, to say that your bank told you it could not help was not entirely accurate. It did investigate your claim and found it “invalid.”

Buyer’s remorse is not a reason to claim fraud or to file a chargeback under the FCBA. Especially when the company has already agreed to release you from your legal obligation.

This type of chargeback abuse has a name: friendly fraud.

Friendly fraud is defined as a consumer filing a chargeback for reasons that are not covered under the FCBA — and requesting a refund for services or products that he or she willingly agreed to purchase. Investigation of such claims ends up increasing merchant and credit card company costs — costs that eventually trickle down to consumers in higher prices.

Chargebacks that are ultimately found to be invalid, such as yours, can also end up affecting your credit rating.

It was unclear to me why you had filed this claim instead of waiting for the refund to be processed, but by the time you reached out to us, you had realized your error in filing the fraudulent charge claim against the travel club. You hoped that we could straighten out this self-created mess and get your money back.

A traveler signing a timeshare or travel club contract while on vacation and later feeling regretful over the purchase is certainly not a stop-the-presses kind of story. It happens all the time.

But because Palladium was willing to reverse your contract, you were luckier than most who find themselves in this situation.

I contacted The Palladium Travel Club on your behalf to see if the company was still willing to refund your money and cancel your contract.

Our executive contact told me that you had already been issued a refund according to the club’s records. He explained that after you had made your complaints to your credit card company, the travel club was informed by its bank that your deposit was reversed.

I provided a copy of the statement from your credit card company that you had lost the chargeback claim and that the funds had been recharged to your account and returned to Palladium.

The executive at The Palladium Travel Club forwarded this information to its banking office. Several days later you received the good news that your refund would be reprocessed, and you have now received it.

You are pleased with this outcome — but it is worth reiterating that this refund from the travel club was a goodwill gesture and that it was under no legal obligation to release you from your contract.

In the future, make sure that you are absolutely certain of what you are purchasing before signing on that dotted line — because a positive resolution such as this is rarely seen in this type of situation.

Michelle Couch-Friedman

Michelle is a Licensed Clinical Social Worker, consumer advocate, writer and photographer who spends as much time as possible exploring the world with her family. She is Advocacy & Editorial Director at

  • Steve Rabin

    Almost sounds like he was trying to double dip.

  • finance_tony

    Isn’t there some kind of chargeback that’s not for only fraudulent transactions? If the OP had waited a reasonable amount of time and never saw the refund, surely he should have some recourse through the credit card without saying the original charge was fraudulent, right?

    As an example, I charged a year of gym membership. After six months, the gym went out of business and closed abruptly. I filed a chargeback for half the amount – but to my knowledge it was never classified as “fraud.” It was just partial services not rendered, even though I had fully agreed to the charges initially.

  • Alan Gore

    Or he was taking the belt-and-suspenders approach, not knowing that chargeback and fraud are two totally different pathways in the credit card organization. The time to call the fraud department is if, as once happened to me, a $4,000 charge from Palermo, a place I’ve never been to, popped up one day on my Visa account. For everything else, there’s chargeback.

  • Dutchess

    Sounds more like someone who got impatient and tried to circumvent the travel clubs system and force their hand. Travel clubs are notoriously scammy, so I bet the OP was nervous that his $4500 was gone and that the promises of a refund were just there to keep him dangling until he runs the clock out or gives up.

  • SirWIred

    I’m not buying this; I’ve filed a bunch of chargebacks over the years, some for fraud, some for other reasons (late/missing refund, goods not as described, etc.) and it was always pretty obvious how to file the correct sort of claim. (The operator always asks if I made the charge; that’s the question that routes it to the correct dept.)

    No, I’m pretty sure he meant to file it as a fraud claim, and then belatedly realized that this lie was not going to end well for him.

  • Annie M

    Another consumer that lied to you about what really happened. Do they think the writers helping them are stupid and aren’t going to dig to make sure you have the facts before you go in a wild goose chase?

  • cscasi

    But, he filed a fraudulent charge claim when it was not. That is what really caused the mess he found himself in.

  • cscasi

    He signed a contract and paid. I do not see anywhere that he was disputing the charge as services not rendered as agreed. Heck, he did not even wait enough time ti give the company a change to render the services per the contract.

  • The Original Joe S

    The toad is lucky they didn’t keep the money, which they could have. What kind of person agrees to a $4000+ membership while on holiday? Well, his name ain’t Albit Einstein! Looks like they are an honest and reputable company. How unusual in this day and age!

  • Blamona

    Had he told you the whole story you could have helped. You should have stopped helping when he withheld info from you. Not cool


    Actually the banks are fools beyond belief. Credit Union are more investigative and difficult. However the bigger banks wull.usually pa out a charge back regardless of whether it was fraud or not. Per policy, these forms are required. I have observed times went claims were denied, mostly due to time frame, it never effected keep appeared on my credit. My accounts remained open and running as usual. The rovisinal credit applied following the report will be reversed. However a notice and a decent amount of time is given before the reversal. These cases are not really criminal and its.hard to prove it was an intentional attempt to commit fraud. Even a simple statement that it was an innocent error and an apology will drop the topic. If not, you should consider switching banks….

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