Smart consumer guide to credit card disputes.

Credit card disputes: How to use them in the right way

During the pandemic, many frustrated travelers have filed credit card disputes, hoping to fast-track refunds. Petra Murdrock was one of those consumers. However, her misunderstanding of the limitations of the chargeback process almost led to a $1,000 loss.

That is until the Elliott Advocacy team got involved.

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And she’s not alone. Requests to clean up the aftermath of chargebacks gone wrong have flooded our helpline since the coronavirus crisis began.

Used properly, credit card disputes can be a powerful weapon in battles against unscrupulous merchants — or outright scammers. But unfortunately, the chargeback process is one of the most misunderstood and misused consumer protection tools that exist today. And, as you’ll read about momentarily, when misused, that “weapon” can implode on a consumer, with disastrous results.

To help you avoid a similar fate, here’s our definitive guide to credit card disputes.

What are credit card disputes?

The Fair Credit Billing Act (FCBA) allows credit card users to dispute charges that involve billing errors and fraud. It also covers services and products not provided as agreed upon. Understanding the types of problems covered by the FCBA is an important part of correctly using a chargeback.

The following are examples of charges that could qualify for a credit card dispute:

  • You buy a pair of shoes for $59, and when the credit card bill arrives, the charge is $559.
  • When you receive the shoes, they’re the wrong color or size.
  • The quality of the shoes is not what you expected.
  • You send back the shoes, but the $59 remains on your credit card.
  • You never receive anything for your $59.
  • The merchant sends you a box of rocks instead of a pair of shoes.

So if you see any of these types of charges on your credit card, you should dispute them immediately, right?

Wrong.

Fact: Filing a credit card dispute too soon is the most frequent chargeback mistake

A consumer should never file a credit card dispute before giving the company a chance to fix the problem.

The FCBA requires credit cardholders first to give the merchant a chance to correct a billing “error” before filing a dispute. Only after the company refuses to address your concerns should you initiate a chargeback.

Note: Of course, this rule doesn’t apply to outright fraud, which you should report to your credit card company immediately.

There are good reasons why you should first try to work the problem out with the merchant.

Credit card disputes are not the magic bullet to a resolution that many consumers believe them to be. Chargeback investigations can be unpredictable, and positive results are never guaranteed.

In fact, the process can be quite disappointing for consumers hoping for a quick resolution of their issue. For these reasons, credit card disputes should only be viewed as a last resort in a battle with a merchant.

But the good news is that most legitimate companies want to avoid credit card disputes entirely. Chargebacks cost businesses — in fees and reputation. Each time a consumer files a credit card dispute, the company is charged a fee by its processor. And a company that receives many disputes is at risk of losing its ability to accept credit cards as payment.

So before disputing a charge, keep in mind — that assuming you have a valid complaint — a reputable merchant will probably want to correct your problem. So make sure not to skip this basic and required step.

Murdrock wishes that someone had warned her about the dangers of filing a credit card dispute too soon. No one did, and she ended up in a 6-month battle to retrieve her $1,000.

A missing security deposit

When Murdrock checked out of her vacation rental last summer, she expected her security deposit to be returned within 7 days, as the Vrbo website indicated. But on day 10, she still didn’t see it. When her emails to Vrbo didn’t result in a satisfactory response, she picked up the phone and called her credit card company. She asked to dispute the charge.

As she would discover in just a few days, that was a mistake.

“I filed the dispute on July 2,” Murdrock recalled. “But then, on July 4, I received the announcement from Vrbo that it had just processed my refund.”

Murdrock was about to find out firsthand what can happen if a consumer disputes a charge too soon. She had inadvertently created an unnecessary and almost insurmountable obstacle to her refund.

When a credit cardholder initiates a dispute, the bank will reverse the charge temporarily. During the chargeback investigation, the money is returned to the consumer’s card.


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In Murdrock’s case, when Vrbo tried to process her refund, the chargeback made it impossible. Vrbo no longer had Murdrock’s money because the bank had taken it back.

Vrbo informed Murdrock of the problem and she called the bank and asked for it to stop the dispute. She thought that call had successfully ended the process.

It didn’t.

A month later, she was shocked by the notice her bank sent her.

She had lost the dispute. Her bank found in favor of Vrbo and returned her $1,000 to the company.

What happens when you lose a credit card dispute and an appeal

“I lost the credit card dispute,” Murdrock recalled. “The bank told me that Vrbo had supplied documentation that supported [the $1,000] as a valid charge.”

No problem, she thought. Vrbo could now process her refund.

Unfortunately, she was about to find out what happens when you lose a credit card dispute.

Fact: Once a company wins a chargeback case, there is little motivation for it to continue to entertain your complaint about the same charge.

I asked Vrbo to send the refund now that I lost the case. But they told me that they don’t have my money and that my case was closed. The bank took it back out of my account. So, where is my $1,000?

By the time Murdrock contacted our team, she had filed an appeal of her credit card dispute — and lost that too. It was four months since she had checked out of her summer rental, and she now realized how the premature filing of her credit card dispute had put her refund in jeopardy.

“How can I get my deposit back? Vrbo says they don’t have it,” Murdrock lamented. “But I don’t have it either!”

Here’s your refund six months later

When I reviewed Murdrock’s paper trail, it was clear that Vrbo never disagreed that it owed her $1,000. The credit card dispute was entirely unnecessary. Had she not filed the chargeback, she would have received her refund 12 days after checking out of her vacation rental.

Initially, her security deposit was a bit delayed in processing because of the global pandemic and resulting reduction in staff at the company.

As we’ve pointed out repeatedly in the past year, the coronavirus crisis has caused many companies to move away from personal customer service and toward automation. This has been a terrible disservice to consumers. We’ve seen, time and again, problems that could easily be resolved by a human, mangled by AI.

Had Murdrock been able to reach someone at Vrbo in July who could assure her that her refund was about to be processed, she never would have filed the premature credit card dispute. She would have saved herself months and months of battling with her bank and Vrbo.

I sent all of her documentation over to our human contact at Vrbo, who was able to fix this problem. Vrbo confirmed with their accounting team that the bank had sent the money back to the company.

Finally, six months after Murdrock checked out of her vacation rental, she received her security deposit refund. And she learned a tough lesson about the dangers and limitations of credit card chargebacks: There is never a guarantee that you will win a credit card dispute.

And even with a valid complaint, if you lose and don’t have a consumer advocate on your side, you may never see your money again.

How to file a credit card dispute the right way

  • Make sure that you have a valid complaint
    Remember, the FCBA only allows consumers to file chargebacks for billing errors, fraud, and cases where services or products were not delivered as agreed. During the pandemic, we’re seeing many consumers file disputes over various things that do not qualify for a chargeback. For example, if you buy a nonrefundable airline ticket and your plans change, that doesn’t qualify for a refund. Don’t fib or bend the truth to your credit card company about the circumstances of your situation. Your bank can only advise you properly about your complaint’s validity if you are forthcoming with the truth. And, of course, it goes without saying that you shouldn’t file a chargeback when the merchant has already agreed to your refund. But then again maybe it doesn’t go without saying. (See: Never report a credit card charge as fraudulent when it isn’t.)
  • File your complaint within 60 days of the transaction or in some cases the date of expected service
    The FCBA requires that a consumer must file a chargeback dispute within 60 days of billing. Interestingly, the terms of service of Mastercard and Visa provide 120 days from the date of billing. If the charge has to do with a service (like an airline ticket or hotel) and the merchant goes bankrupt or is unable to provide the service, then the 60 days begin from the date the service was to be rendered ( See: How to get a refund from a bankrupt airline). Our executive contact at Bank of America explains: “The general time frame allowed for chargebacks under the Visa/MasterCard chargeback guide is 120 days from the transaction date. When the merchant is bankrupt, that time frame is generally extended to 120 days from the expected date of service.”
  • Your bank can always bend the rules — if it chooses
    Remember, your bank can always choose to protect you — especially if there are extraordinary circumstances. We’ve seen credit card companies allow successful chargebacks a year or more after the scheduled date of service. (See: How to get your money back from an unscrupulous tour operator.)
  • File your dispute through your online account
    The FCBA says that you must file your complaint in writing, but this doesn’t typically need to be done by snail mail in 2021. The act was first issued in 1974, before the dawn of the digital world. In 2021, most credit card companies allow you to easily process your credit card dispute through email and via your online account. When reviewing your monthly charges in your credit card account, there should be an option to dispute any charges. If your bank provides a physical mailing address to file a dispute, it doesn’t hurt to send your complaint that way as well. But you’ll want to make certain that you’re following the formal chargeback protocol of your particular credit card company.
  • Watch your email for requests for additional information
    After you’ve filed your credit card dispute, the merchant will have 30 days to respond to your complaint. Remember to watch for updates from your bank as you might need to provide additional information. And don’t forget to check your spam folder!

If the merchant doesn’t respond within 30 days, your credit card company will likely close the dispute in your favor. But now you have other things to worry about…

Credit card disputes should be used with caution. Here’s why

The Elliott Advocacy team battles many cases each year that have already ended in credit card dispute losses for consumers. These are complicated cases to fight since there is very little motivation for a company to answer our team after a chargeback ends in its favor. So it’s critical to make sure that you’re filing a chargeback case that qualifies under the FCBA.

  • Winning doesn’t necessarily mean what you think it means
    Many consumers believe that winning a credit card dispute means the end of the problem. Unfortunately, this is often not the case and can be just the beginning of a new and bigger battle. It’s important to remember the conclusion of a credit card chargeback investigation only ends your bank’s involvement in the dispute. The FCBA does not require that the merchant drop the pursuit of the debt if the consumer is the victor in a chargeback dispute. The company is always free to collect the debt in other ways — a debt collection service, small claims lawsuit, or by reporting it to credit agencies. We know that many major travel providers and cruise lines may not fight a credit card dispute, but they will pursue the debt elsewhere.
  • Credit card dispute investigations are not comprehensive
    If you’re a regular reader of our site, then you know that when we investigate a consumer’s problem, we investigate the problem. We look at all the evidence and paper trail; we gather facts and put together a compelling case to present to the company on behalf of the consumer. Credit cardholders should not expect that level of analysis during a dispute. In fact, many consumers are surprised when the bank asks for very little supporting documentation or appears not to have read the details of the case. For this reason, many credit card disputes are resolved in favor of the vendor simply because it responded to the dispute.
  • Be prepared to go on the blacklist
    Even if a company doesn’t fight your chargeback, that doesn’t mean there will be no repercussions. Many businesses will simply write off a consumer who files a dispute rather than respond to the chargeback. If you win by default and the company believes you are in the wrong, you may find yourself on the blacklist. (See:  Surprise! You’re on the Do Not Sail List. Now what?.)
  • File too many chargebacks, and you could end up on another blacklist
    Credit card disputes cost merchants and banks. So if your credit card company determines that you’re filing too many chargebacks, you may find yourself on its blacklist too. Friendly fraud is something that banks and merchants don’t take kindly to. If you misuse the tool the FCBA created to protect consumers, you may end up being prevented from using it (and your credit card) again!
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