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

A fraudulent credit card charge?

Philip Paul comes down with a severe 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.


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 the deposit that I made using 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 they processed my refund and there is nothing else they can do to trace it.

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.


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 have been able to help.

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

Something was not adding up here.

Reporting a fraudulent credit card charge 

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

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 situation would not be considered a billing error or a fraudulent credit card charge.

The Palladium Travel Club defends itself

When your credit card company reached out to the Palladium Travel Club, the company was obliged to defend itself against your claim that it had fraudulently charged your credit card. 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. It had found in favor of The Palladium Travel Club.  Your credit card company 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 credit card chargeback under the FCBA. And your decision to file the claim after the company has already agreed to release you from your legal obligation was puzzling.

Friendly Fraud

This type of chargeback abuse has a name: Friendly Fraud.

One way to commit Friendly fraud is by filing a chargeback and requesting a refund for services or products that you willingly agreed to purchase. Investigation of such claims ends up increasing merchant and credit card company costs. These costs eventually trickle down to consumers in higher product 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 fraudulent credit card charge claim instead of waiting for Palladium to complete the refund.

But by the time you reached out to us for help, you seemed to have realized your error. 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.

Contacting our executive contact at The Palladium Travel Club

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 Palladium reprocessed your refund.  Your $4,600 is now back in your account.

You are pleased with this outcome. But it is worth reiterating that this refund from the travel club was a goodwill gesture. The company 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 in this type of situation, we rarely see a positive resolution.

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