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When you buy from a new website for the first time you may be worried about the possibility of fraud. But this is where chargebacks can help you shop with ease.
Take 27-year-old Krishna, a frequent online shopper, who recently fell prey to a fraudulent website while trying to buy a hot-selling video game. As Krishna finished making the payment, the page reloaded and he received a ‘session timed out’ error. The transaction failed, and the merchant never received the payment, but the money had been deducted from Krishna’s bank account. Krishna was not too worried as he had been in a similar situation before and knew that the money would be credited back into his account within 2-3 working days.
In the meantime, Krishna got his game from his regular e-commerce site the next day and forgot about the previous ordeal. A little over a month had passed when Krishna checked his bank statement and realised that the money still hadn’t been credited back. He inquired with his bank and was informed that the payment had, in fact, reached the seller. Hearing this, Krishna tried contacting the seller to file for a refund, but he received no answer. Realising that he had been a victim of fraud, Krishna contacted his bank, and they advised him to file for a chargeback.
What is a Chargeback?
A chargeback is a provision powered by banks and card networks that empowers defrauded customers to successfully dispute any unapproved transactions charged to their debit or credit card. It acts as a safety shield between customers like Krishna and fraudulent businesses.
When a customer files for a chargeback, the amount is reimbursed straight from the merchant’s bank account. The merchant can choose to contest the claim. If the bank’s investigation finds the merchant’s dispute to be genuine, then there will be no chargeback.
How is a Chargeback different from a Refund?
Chargebacks may seem very similar to traditional reimbursements; however, there is one significant difference. Here, a customer requests the bank to pay back the money. The bank then carries out an inquiry. If the cardholder’s appeal is justified, funds are drawn from the merchant’s account and refunded to the consumer. Another difference between a chargeback and a refund is that customers are not obligated to return what they have purchased.
Is there a difference between a credit and debit card chargeback?
Chargebacks are applicable on transactions carried out by both debit and credit cards. Each bank has a different stipulated period during which you can file for a chargeback. For some, it ranges from 45-120 days from the transaction date; for others, it is even less. The moment you suspect any fraudulent transactions taking place, inform your bank manager so that they can assist you further.
When Can You Request a Chargeback?
There are several situations where you can demand a chargeback. Let’s run through a few different scenarios:
Unapproved charges on your card:
If you are a victim of fraudulent transactions via your debit or credit card due to identity or card theft, you can request a chargeback. Many credit cards offer zero liability on unauthorised transactions. This ensures that you won’t be held responsible for any of these unapproved payments.
Parcels that were never delivered:
Receiving a notification saying ‘Order Delivered’ usually sparks joy. But on those rare occasions where your order hasn’t been delivered, and the merchant is uncooperative or doesn’t respond, you can file for a chargeback. In addition, if you have paid for a service but haven’t received it, you can request a chargeback as well.
Broken or faulty items:
Sometimes products are delivered in a damaged state or have been tampered with and have certain missing parts. You can request the merchant to replace the product with a new one or issue a refund in situations like these. If the merchant doesn’t acknowledge the issues, you can opt for a chargeback.
Inappropriate charges on your account:
If there is a transaction error wherein you are charged more than your purchase amount, you can contest the charges directly or through a chargeback.
How can I file for a Chargeback?
Before opting to file a chargeback with your bank, it is essential to reach out to the merchant and try to resolve it directly. Most merchants have proper return and refund policies. But there are often fraudulent sites that won’t revert to requests.
Contact Your Bank
The first step to initiate a chargeback is to go to your bank and file a dispute. You will have to highlight the transaction you are disputing and provide your bank with the reason you are challenging the payment.
Bank Informs The Merchant
If the bank believes your dispute is valid, they will reach out to the merchant’s bank and debit the money from the merchant’s account.
Merchant Contests or Accepts
The merchant can either contest your claim or pay the money back at this stage. If the merchant wishes to fight the claim, they will have to send a rebuttal letter and proof that the transaction is legitimate.
Issuing Bank Reviews Evidence
After the merchant submits the evidence, the issuing bank, which is your bank, will review the proof and make an informed decision. If your bank finds the merchant’s claims to be valid, they will return the money to their account. But if the bank believes the claim to be fraudulent, the money will be credited to your account.
Chargebacks are a great safety net that allows you to transact online without the risk of being defrauded. While the process is relatively smooth, it is always advisable to reach out to the merchant before filing for a chargeback. More often than not, these situations can be resolved between you and the merchant speedily without the hassle of involving banks.