What is ChargeBack
If you are unfamiliar with the term, your first question is probably going to be 'What is a credit card chargeback?' or 'What are chargebacks?' or 'What does "chargeback" mean?' Even if you know, you still might ask 'How do chargebacks work?' or 'Is there a credit card chargeback time limit?' or 'How to file a chargeback?'
Every time you use a credit card or debit card you are initiating a transaction that is controlled and regulated. If it’s a Visa or Mastercard, your transactions are governed by terms and conditions that they adopted and published. These terms and conditions define rights and obligations for you, your bank, the merchant, and its bank.
For example, if your card was lost or stolen and you see unexplained transactions on your account, you can immediately request your bank to reverse the charges. Visa and Mastercard mandate your bank take that action to protect you from fraud. Even when you willingly make a purchase, you are protected should your purchase not materialise or you receive something other than what was promised.
What are chargebacks?
A chargeback is, in the simplest possible terms, the retroactive cancellation and refund of a charge made on your credit card or debit card. You request a chargeback from the bank that issued the card itself. But you can do so only under one of two conditions:
- There was an unauthorised transaction, or
- The authorised transaction was for goods or services that the merchant did not deliver as per a contract, receipt or some other written agreement
How long does a chargeback take?
The entire credit card chargeback process or debit card chargeback process, from your initial request to the final resolution, can take up to six months. In most of the cases we handle, chargeback processing takes three-to-four months.
How do chargebacks work?
Visa and Mastercard have set guidelines for issuing banks whereby a cardholder can apply for a chargeback at any time within 120 days from the date of the transaction. Under certain conditions, the chargeback processing period can be as many as 540 days. In some jurisdictions, the law provides you with even more time to apply for a chargeback.
American Express also imposes a 120-day time limit on its cardholders. Discover and Diners Club International, which it owns, do not have any chargeback time limit.
How to file a chargeback?
The debit card or credit card chargeback process begins when a cardholder submits a request to dispute a transaction with the merchant to the bank that issued the card. The technical term for your bank is the issuing bank. Once the issuing bank accepts your request, it will raise a dispute with the merchant’s bank. The technical term for the merchant’s bank is the acquiring bank. The issuing bank alerts the acquiring bank through the credit card network’s dispute resolution centre scheme. The acquiring bank then informs the merchant. In certain cases, the sum you challenge may at this time re-appear in your account as a temporary credit. If so, DO NOT use it. Wait until you win your case and the temporary credit becomes permanent.