How to get cash back from chargeback
Chargeback schemes can help customers get what they paid for - or get their money back.
In this guide we look at when debit and credit cards are covered and how cardholders can make a claim.
What chargeback can do
Chargeback is a process that allows debit and credit card holders to reverse transactions when there is a problem with the goods or services they've purchased using their cards.
Card companies like Visa, Mastercard and American Express run the process so that it applies to any card with their logo: credit, debit and even prepaid.
Although it's organised and run by the card companies, customers wishing to use chargeback must go through their card issuer - usually a bank or building society.
It's up to the card issuer to try to recover all or part of the money, provided that there is evidence of a breach of contract.
Breaches covered under chargeback include situations like the following:
- The cardholder has bought a TV. As soon as they get it home they realise it has a serious electrical fault but the retailer refuses to help.
- The cardholder orders an item online but it never arrives and the retailer refuses to refund the cost.
- The cardholder was overcharged for an item as the result of a technical fault.
- The cardholder looks at their statement and sees that there's been a clerical error: the account was debited twice for one purchase.
- There's an unexplained and possibly fraudulent charge to the account.
- The trader goes bust before they can provide the goods already paid for.
It gets our money back
Simply put, chargeback can get us our money back when other attempts have failed or are unsuitable.
As should be clear from the examples above and below, it's most likely to be applicable in situations where a retailer refuses to admit fault.
|Case study (from the FOS)|
|Mr A hired a van in order to move house. He agreed a fee of £179.99 and paid over the phone with a debit card.
When his statement came Mr A discovered that the van hire company had taken £628.81 from his account.
Unable to resolve the issue with the company, he initiated a chargeback through his bank. Following an investigation, got back the money he was overcharged.
What it can't do
However, chargeback isn't a silver bullet for disputes with retailers.
As we'll see in the next section, cardholders can't enter into the process until they've already exhausted other options.
Even then, Visa, Mastercard or Amex must be satisfied that the claim meets the specific conditions of their chargeback scheme.
It's also worth noting that unlike Section 75, chargeback isn't enshrined in law - there's no legal obligation to offer or honour this kind of protection.
Making a claim
With that caveat, let's look at how to make a claim under a chargeback scheme.
1. Exhaust other options
In some cases - for example, when a clerical or technical error has caused an account to be debited twice for one purchase - chargeback is the next logical step.
When it comes to disputes with retailers, however, it's better viewed as a last resort.
Only where the cardholder can demonstrate that the dispute is in deadlock, and that they are entitled to be refunded under existing consumer law, will their claim be approved.
Banks judge each request for chargeback based on the reason it's being made, using what is known as "reason codes" to decide whether each claim is legitimate. If the criteria for the best fitting reason code for that transaction aren't met, the chargeback will not be processed.
For example, reason code 53 relates to goods that are "not as described or defective".
In this case, a cardholder must "attempt to return the merchandise or resolve the dispute before contacting his bank" before they can make a chargeback claim.
Only if this fails - because, for example, the retailer is no longer in business - will the bank consider allowing chargeback.
2. Check the time limit
It's important not to push informal resolution too far, though, because the chargeback process can only be initiated within a fairly short time period.
Different situations - covered by different reason codes - have different time limits, ranging from as little as 45 days up to 120.
|Time limit||From 75 days to 120 days of becoming aware of a problem||120 days of becoming aware of a problem||120 days of becoming aware of a problem|
With some kinds of transaction, however, customers may have longer than these time limits to start their chargeback request.
If a longer limit is in place, it's likely to cover cases where we're paying for an "open ended contract", as Mastercard put it, where there's no specific delivery or service date.
The following time limits then apply:
- Visa: 540 days from transaction processing date
- Mastercard: 12 months from transaction processing date
3. Make a clear claim
As already mentioned above, to start the chargeback process cardholders must contact the bank that issued the card they paid with.
Some banks require chargeback applicants to fill out a specific form in order to make their claim, which they'll send out in the post.
Whether they need to fill in a special form or not, cardholders should expect to have to provide the date of the transaction, the amount it was for, the name of the merchant, and a brief description of the dispute.
Depending on the nature of the claim, applicants may be asked to provide further information.
Applicants are advised to keep copies of any correspondence.
The bank will then contact the merchant's payment processing bank and attempt to recover the money, which may take some time. Unfortunately, there are no guarantees that a chargeback request will be successful.
Problems making a chargeback claim
It's fairly common for card issuing companies to be unhelpful or obstructive when a consumer puts in a chargeback claim since, just as with section 75, many call centre staff members aren't well trained in this area.
In 2008, a Visa spokesperson admitted to The Guardian that, "The word 'chargeback' is sometimes not recognised because the process has only recently begun to be used widely by consumers."
Even now, eight years on, many staff seem just as clueless.
Visa went on to say that cardholders should be polite but firm and ask to speak to a supervisor.
Some claimants find it easier to set out the problem clearly in a letter.
Dealing with rejection
As we've noted, chargeback is purely voluntary, and banks - and the credit card companies themselves - are perfectly entitled to reject a claim for chargeback.
However, that doesn't mean they can do so on a whim.
Where a chargeback applicant believes that their card issuer hasn't followed the rules on chargeback, or they're dissatisfied with how their claim has been dealt with, they may take their case to the Financial Ombudsman Service (FOS) for a second opinion.
The good news is that while the initial period for making a claim may be time limited, cardholders have six months from the date of their final correspondence with the card issuer to make a further complaint.
Finally, it's not unknown for banks engaged in a chargeback dispute to refund money to the claimants account before the matter is fully resolved.
If, however, the investigation into the chargeback claim finds in the merchant's favour, the claimant could well have the payment taken from their account again.
In some cases, the card issuer may decide to absorb the loss, but it's more likely that they'll re-debit our account. If they do, they should give us warning first - but they don't always do so.
In other words, don't go spending refunds before the jury's in on a claim.