What Happens If You Dispute a Charge With Your Credit Card?
Does your credit card statement show a $5000 charge you don’t remember authorizing? It might be time to dispute. But what actually happens when you dispute a charge with your credit card? Do you still have to pay? Is your credit score affected? Is interest added?
Unless you’re a chartered accountant, managing finances can be difficult, but here are some easy answers. This is what happens if you dispute a charge with your credit card. So when the next $5000 charge shows up, you can rest easy knowing that you’re the one who made it.
Step 1: You File The Dispute
Under the Fair Credit and Billing Act, you have the right to dispute a credit card charge. Why would you dispute a charge in the first place? Plenty of reasons. It could be that the charge is fraudulent, made by someone who stole your information and is buying things in your name. It could be because the item you purchased was defective, or never arrived at all. It could be because the merchant accidentally (or on purpose) charged you twice, or maybe you cancelled a subscription but still received a bill. When you file a dispute, you’ll generally do it through your bank’s mobile app or website, or you could call your bank directly and speak with a representative about the dispute.
Step 2: You’re Issued a Temporary Credit
While reviewing your dispute, the bank will likely issue you a temporary credit (i.e. money). So if you’re disputing a charge for $200, your bank will issue $200 worth of provisional credit back to you. The operative word here is temporary credit, the bank could decide to reverse the credit later if it decides that the dispute is invalid on your end.
Step 3: The Bank Issues a Chargeback
After your temporary credit is issued, the bank contacts the merchant from whom you made the purchase and asks for proof of a valid transaction. They’re essentially allowing the merchants a chance to defend themselves.
Step 4: The Merchant Can Fight the Chargeback
After receiving the chargeback, the merchant can provide proof of a valid transaction. This could come in the form of a receipt with a signature, a delivery confirmation, an explanation of their terms of service, photos of the delivered package, or documentation of the service rendered. If the merchant fails to provide evidence of a valid transaction, then the bank automatically decides in your favor.
Step 5: The Bank Reviews the Evidence
After receiving evidence of the transaction from the merchant, the bank determines its validity. This depends on the strength of your claim, the quality of the merchant’s evidence, and the bank’s own internal rules. If the bank rules in your favor, the provisional credit you were issued becomes permanent. If they rule in favor of the merchant, they will revoke that credit. Even if you lose the dispute, this doesn’t lower your credit score, according to Credit Karma.
Imporant Note About Fraud vs a Billing Dispute
When you report fraud, this means that someone stole your card information and is making unauthorized transactions in your name. The bank usually responds by canceling your card immediately and issuing a new one. When you dispute fraud charges, the bank is much more likely to rule in your favor. There’s no merchant to contact in this situation, after all. The only evidence the person who made the charge could give the bank is evidence of wrongdoing.
When you dispute a charge from a merchant that you initially authorized, these cases are harder to win. The bank will often reject your dispute if you don’t file it within 60 days after the initial purchase, or if the merchant has already refunded you or provided clear evidence that they delivered the good or service you purchased.
Should You Dispute A Charge?
While the decision to dispute is ultimately up to you, you are unlikely to experience any negative consequences for disputing a charge — save for losing the dispute, that is. Should you wish to know more, the Federal Trade Commission has issued a detailed guide to using credit cards and disputing charges.
(featured image: Wikimedia Commons/WikiBoy06)
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