Last updated June 2020
Defective merchandise. Shoddy plumbing jobs. Car repair shops that don’t repair anything. Undisclosed and unfair extra service fees. Shipments that never arrive. Even careful consumers sometimes run into problems.
We often advise our readers to pay using a credit card. That’s because using plastic is more than just a convenient way to pay for stuff; when you use one, you automatically get incredibly strong protections against most lousy-service scenarios and companies that sell faulty goods.
The genesis of these protections is the federal Fair Credit Billing Act, which protects you from fraud by requiring credit card companies—not consumers—to deal with fraudulent charges. The law also provides important protections against billing errors.
What many consumers don’t know is that the law also requires your credit card company to give you the chance to dispute charges and withhold payment for goods and services that you didn’t accept or that weren’t delivered as promised. This means that if you used a credit card to pay for something that isn’t satisfactory, and you tried to work it out with a seller who won’t budge, you can tell your credit card company you want to contest the payment and get your money back. Ditto for defective or undelivered products.
When you request a “chargeback,” the seller can protest. It may claim you made no effort to resolve the matter, refused to return goods that you say are unsatisfactory, or that the goods are exactly what you ordered. But sellers rarely succeed in reversing chargebacks. As long as you return the merchandise (or try to return it) or document the product or service defect (for example, by having a second auto repair shop correct a lousy repair and write up what they did), you’re likely to win the dispute and get your money back. Sometimes credit card companies simply eat disputed charges to satisfy their customers, rather than launch an investigation.
In our experience—feedback from consumers and our staff who have needed to request chargebacks—credit card companies are far more likely to side with consumers than businesses during these disputes. Billing mistakes and cases of theft and fraud, in particular, are almost always handled promptly—no surprise since laws clearly protect consumers from these types of problems. For disputed transactions related to lousy service or defective merchandise, we find credit card companies usually remove charges quickly, with few or no questions asked.
Since credit card issuers want to keep customers happy, the protections they provide are, in practice, even broader than your rights under the law. For example, while the law states that you have to contest a charge within 60 days of receiving a bill, most banks that work with Visa and MasterCard give their customers 120 days to contest it, and on a case-by-case basis usually allow even more time—especially if you can document that you could not have known about the problem any sooner. And while the law protects you only for purchases in your home state or within 100 miles of your current billing address, credit card companies usually let you contest any charge. American Express, in particular, is well known by retailers to have a very generous policy toward its card users.
And while debit card purchases aren’t covered under the Fair Credit Billing Act, when you pay with a debit card that uses the Visa or MasterCard payment system to complete a purchase, that purchase is governed by Visa’s and MasterCard’s consumer-friendly rules. If when paying with a debit card you're asked to choose “debit” or “credit” at checkout, picking “credit” pushes the transaction through the Visa or MasterCard system. But choosing “credit” doesn't turn your debit card into a credit card; the money to pay for the transaction still comes right out of your bank account.
To contest a charge, ask the bank or company that issued your credit card for its chargeback procedures. Often, you can do it on its website: Simply go to your list of purchases, select the transaction, and use a link to report a problem. Some banks still require customers to submit requests in writing and mail in documentation (this is most common with debit cards).
Even if you already paid your credit card bill in full, you can still contest the charge. During the time that the credit card company investigates, the questionable charge is removed from your outstanding balance, and you are not required to pay it or the portion of your balance, or any interest, until the dispute is resolved. If the credit card company rules in your favor, it simply pulls the money out of the seller’s account and credits yours.
But, again, we find that credit card companies side with consumers in the vast majority of these cases. A few success stories from our staff:
- Last summer, I was hit with a $276 “special cleaning fee” to vacuum my kids’ crumbs from the backseat of a car from Alamo Car Rental in Zurich. Alamo’s U.S. corporate office admitted the charge was “ridiculous,” but because its location in Switzerland is owned by a licensee, it couldn’t refund the charges. Its requests to its Zurich office to do so were ignored. After several months of seeking action from Alamo and Barclaycard, I convinced his credit card bank to reverse the charges.
- Two years ago, senior writer Jeff Blyskal bought a license for Parallels, software that lets Mac users run Windows and PC software, from Apple’s iTunes store for $85. He didn’t think the program performed as advertised—it was not so easy to switch back and forth from Windows to Mac—and he decided he didn’t want it. Unfortunately, the fine print of Apple’s return policy stated software downloads are “ineligible for return,” which means no refunds. After arguing with Apple over the phone with no results, Jeff disputed the payment with his credit card company, which promptly removed the charge.
- We find consumers usually can get their money back, even when the dispute is with a bankrupt or out-of-business company. In 2019, Ross Jespersen and Dani Dredger, our digital marketing manager, got stranded in Iceland when their airline, WOW air, went belly-up and they had to buy return tickets on Icelandair. They then disputed the unused portion of their roundtrip tickets with WOW air. It took more than three months, but they eventually got their money back for their canceled return flight.
Sometimes credit card companies do side with sellers, even when sellers clearly were in the wrong; sellers more often win disputes when customers have signed contracts during the purchase process that include clauses such as “buyer beware” or “all sales final.”
But if your request for a chargeback is denied, don’t give up. When I contested Alamo’s absurd cleaning fee, Barclaycard initially sided with the rental car company and sent me a letter that blandly said there was insufficient evidence to reverse the charges. After spending a few more months asking Alamo for a refund, with no success, I called my credit card company and insisted the fee was unfair—and that the burden was on Alamo to justify the charge, not its customer. Barclaycard relented and wiped out the charge.
Before disputing a charge, give the offending company a reasonable chance to make things right. Chargebacks are serious problems for businesses that get hit with them: They lose the disputed amounts plus pay fees of $50 to $150, depending on the credit card company. If they get too many chargebacks, they can lose their right to accept credit cards. The process is so consumer-friendly and powerful that often just threatening to make a chargeback request will get a business to do the right thing.
Don’t take advantage. Just as credit card companies keep a lookout for companies that abuse their customers, they also keep track of cardholders who dispute too many charges. Although it’s a rare occurrence, your company can cancel your account or refuse to investigate future problems if you dispute too many transactions.
And keep in mind that a chargeback on your credit card account doesn’t mean the seller has no rights against you. The seller can still try to get payment by suing you directly.