Do I have to pay the disputed amount? No. You can withhold payment of the amount in dispute and the finance charge on that amount until the card company investigates the dispute. You can also withhold the interest payment on the disputed amount.
If your credit card company resolves the dispute in your favor, it will remove or fix the charge and any fees and interest charged on that amount. If you already paid the disputed amount, the credit card company will refund you.
Loss of revenue: Chargebacks result in a direct loss of revenue for merchants, as they have to refund the disputed amount to the customer.
Traditional refunds come directly from the merchant. With disputes, though, the bank pays the consumer upfront. They then claw back the transaction amount from the merchant's account. From a customer's perspective, there doesn't seem to be much of a difference: they get their money back either way.
But if the dispute is valid, the issuer is legally obligated to reimburse the cardholder. The funds can come from one of two places. Either the issuer takes a financial hit and accepts the loss. Or, the issuer uses the card brand's dispute processes to revoke the money from the merchant and return it to the cardholder.
If you file a dispute for a credit card charge with a bank, that bank will quickly notify the corresponding merchant that you've initiated this process.
Key Takeaways
In some cases, even if you willingly paid for something, you can file a dispute. This includes when there is a billing error, you did not get the item in acceptable condition, or you did not receive the full services promised.
Disputing a credit card charge has a 96% success rate
Of those who disputed a claim, 75% had an authorized charge, 21% claimed they didn't receive the goods they paid for or they were defective and 21% said they canceled a subscription and were still charged.
Key takeaways
If the credit card issuer denies the dispute, the customer can request supporting documents and can also appeal the decision or file a complaint with consumer protection agencies. If the dispute is still not resolved, customers can seek legal advice and file a case.
When a cardholder disputes a charge, the issuer is expected to examine the details of the case and make a fair, impartial judgment to determine liability. The card networks have extensive and complex guidelines for this, and these rules determine how banks investigate disputes for the relevant card brand.
Winning chargeback disputes is a challenge for merchants, with success rates typically hovering around 20-40%, depending on the industry and the quality of the evidence provided. Many disputes are lost due to insufficient documentation, delayed responses, or lack of expertise in presenting a compelling case.
Disputing a charge on your credit does not directly impact your credit score. However, if your credit report changes due to the dispute, your score may change accordingly. For example, resolving an inaccurate credit utilization error might increase your score.
The issuer then makes the final decision on whether to give the customer the chargeback or deny it. If the customer's chargeback is denied, the merchant will get the transaction amount refunded to their account. If the chargeback is approved, the customer gets the purchase amount refunded to them.
However, in alternative dispute resolution, the general principle is that each side pays their own costs. You should aslo be aware that if you refuse to consider a form of alternative dispute resolution before or during litigation, then you may even have to pay the other sides costs, even if you win.
The bank must investigate and resolve the issue within two complete billing cycles (but not later than 90 days) after receiving the billing error notice.
Filing claims might be extra work, but the majority think it's worth it. Among those who've successfully disputed a claim, 91% say it was resolved within a month and 98% feel filing was worth it.
You might not always get a fair outcome when you dispute a chargeback, but you can increase your chances of winning by providing the right documents. Per our experience, if you do everything right, you can expect a 65% to 75% success rate.
The card issuer must send you a letter stating that it has received your billing dispute within 30 days of receiving it and complete its investigation within two complete billing cycles which generally means it cannot take longer than 90 days.
Who pays when you dispute a charge? Your issuing bank will cover the cost initially by providing you with a provisional credit for the original transaction amount. After filing the dispute, though, they will immediately recover those funds (plus fees) from the merchant's account.
Fraudulent Transactions: One of the most common reasons for a chargeback is fraud. A customer might notice charges on their credit card statement for purchases they did not authorize. Upon investigation, they discover their credit card information was stolen and contact their bank to file chargebacks.
Examining a charge dispute, it's clear merchants take a hit. Financial implications can be bad. Such as non-refundable chargeback fees from payment processors. Several chargebacks can up the processing fees or end the account, losing access to online payment services.
Merchants win chargeback disputes approximately 20-30% of the time, though this success rate can vary widely based on factors such as the industry, the quality of the evidence presented, and the specific reason for the chargeback.
In a Nutshell
The cardholder can face consequences for chargeback abuse, including account freezes, losing one's bank account, damage to one's credit score, and even legal consequences.
Within 120 days of the last date, the cardholder expects to receive the goods or services (not to exceed 540 calendar days from transaction). Within 120 days of the date, the cardholder was informed that the goods/services would not be provided (not to exceed 540 calendar days from transaction).