What is a chargeback and how does it work?
Money Talk is intended to inform and educate; it's not financial advice. Affiliate links, including from Amazon, are used to help fund the site. If you make a purchase via a link marked with an *, Money Talk might receive a commission at no cost to you. Find out more here.
One of the reasons why I love using credit cards over debit cards is because the former offers additional financial protection under Section 75 of the Consumer Credit Act.
This bit of legislation makes the card provider and the vendor jointly responsible when things go wrong, which in turn makes it easier for you to get your money back.
But actually, there’s an alternative way you can get your money back when things go wrong: by initiating a chargeback request.
Chargebacks are available for both debit card and credit card purchases but the rules are completely different.
Here’s how chargebacks work and how you can use them to get your money back.
What is a chargeback?
Chargebacks offer you a way to get your money back when things go wrong and you can’t get a refund the normal way.
The process only covers transactions made using a credit card or debit card, and not a bank transfer.
When you initiate a chargeback request, what you’re doing is asking your card issuer to reverse a transaction.
Unlike Section 75 protection, chargebacks aren’t written into law.
Instead, it’s a voluntary scheme with rules set out by the three participating payment networks: Visa, Mastercard and American Express.
It’s worth noting that the rules around chargeback can vary for this very reason so it’s worth checking any terms and conditions available from your card issuer.
How does a chargeback work?
Before initiating a chargeback request, you need to try to resolve the issue with the vendor first.
Your card issuer will expect this first step to have taken place before you approach them for help.
By the way, the vendor here can mean a retailer or service provider.
If you’re not having any luck with the vendor, and if you believe you have a case, it’s time to contact your card issuer.
You’ll need to explain why you want a transaction to be reversed and provide details so it’s a good idea to keep hold of any evidence such as purchase receipts and correspondence with the vendor.
If the card issuer decides you have a valid claim, it will contact the vendor’s bank, giving them the opportunity to respond and dispute the claim, so a refund is not automatic.
And in fact, your claim could be rejected if your card issuer has decided there’s insufficient evidence to prove your claim, or if the vendor has successfully proven that your claim is invalid.
The process can take anywhere from 30 days to 12 weeks so expect a bit of a wait.
Sometimes a card issuer will process a temporary refund while it investigates the claim and, depending on the outcome, you can either keep the money or have to pay it back
When can you request a chargeback?
Like Section 75 claims, you can only make a chargeback request under certain circumstances.
This includes situations where you don’t get what you’ve paid for.
That might be when you physically don’t receive the goods or service, or what you’ve received is different from what was described, or you’ve received something defective and you can’t get the vendor to repair or replace it.
It also includes situations where you’ve been charged the wrong amount or were charged even after you’ve cancelled a subscription.
Crucially, any chargeback requests you make must be within 120 days of the transaction, or when you expected to receive the goods or service.
What evidence do you need?
Having evidence is crucial to a successful chargeback claim.
You’ll generally need to supply things like receipts, invoices, order confirmations and proof of payment, as well as proof of correspondence with the vendor.
If it’s a faulty item, evidence of the fault must also be supplied.
Or if you’ve been charged for a cancelled service, you’ll need to show things like a cancellation confirmation and evidence of subsequent charges.
The vendor will need to supply evidence, too, to dispute the claim.
This might be things like delivery records and proof of receipt as well as correspondence with you.
When the chargeback request is declined
Your card issuer will review your chargeback claim based on the evidence supplied by both sides and it can approve or decline your request to reverse the transaction.
If it decides to decline your request, it must tell you the reason for its decision.
If you’re not happy with the outcome, you can escalate your complaint through the card issuer.
And if your request is still declined, and you believe you have a case, then you can appeal using the Financial Ombudsman Service – its decision is final and legally binding.
Chargeback vs Section 75
Chargeback and Section 75 both offer you a way to get your money back when things go wrong but they work in very different ways.
Section 75 offers financial protection under the law, but it only applies to credit card transactions where the total cost of the goods or service is between £100 and £30,000.
Chargeback, meanwhile, is a voluntary scheme.
However, it applies to both credit card and debit card transactions of almost any value (Mastercard requires a minimum transaction value of £10).
For credit card users, it represents another level of protection for transactions outside the thresholds for Section 75 protection.
Pin this for later
