Guide to Credit Card Chargebacks: Do You Need to File One?

Jason SteeleUpdated November 22, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Credit card chargebacks occur when a customer disputes a transaction and asks the credit card issuer to reverse the charge.Chargebacks are different from refunds, which are much more common and happen when you return an item or when a merchant is unable to fulfill an order and subsequently issues a refund to your card.A chargeback, on the other hand, only comes into play if a purchased item never arrives or arrives damaged and, despite trying, you are not able to resolve the issue with the merchant. At that point, you can contact your credit card issuer and request a chargeback, which credits your account for the charge and triggers a dispute process.While chargebacks are an essential consumer safeguard, many cardholders have never even heard of this credit card term. Read on for a closer look at credit card chargebacks, including how they work and when and how to use this important purchase protection tool.

What Is a Credit Card Chargeback?

A credit card chargeback is bank-initiated reversal of a credit card payment. Chargebacks happen when a cardholder contacts their bank to dispute a credit card charge and request that the payment be “charged back” to their account. Chargebacks are usually used to reverse a billing error, an unauthorized charge, or a failure to deliver a product or service.While a chargeback is similar to a refund, there are a few key differences. With a refund, the merchant is the one to initiate the transaction; with a chargeback, the bank initiates the transaction at the customer’s request. With a refund, the customer deals with the merchant directly; with a chargeback, the customer goes through the credit card issuer. A consumer will request a chargeback when asking the merchant for a refund doesn’t work.

How Do Credit Card Chargebacks Work?

If a transaction goes awry and you can’t settle the issue with the merchant, you can contact your credit card issuer and dispute the charge. Typically, the card issuer will refund the money you paid temporarily, and then conduct an investigation to determine who is liable for the transaction. This temporary credit is only yours while the investigation takes place, and you’ll have to wait to find out if the chargeback becomes permanent. At this point, your card issuer, the credit card network (such as Visa or Mastercard), and the merchant’s bank will look over the charge to determine whether it is legitimate, and as well as how the problem should be resolved. If the merchant you purchased from disputes the chargeback, there may be some back and forth between all three parties, and you may be asked to provide more proof to back up your case, such as receipts or communication between you and the retailer. Ultimately, the credit card network decides who pays for the charge.Your credit card issuer is required to explain the final decision to you in writing. If you win the dispute, the temporary credit you receive will become permanent. If it’s decided the dispute is not valid, the purchase will be reinstated on your credit card account.

When to File for a Credit Card Chargeback

The Federal Trade Commission protects consumers from unauthorized charges and gives them the right to dispute charges for goods or services that are different than promised. Your credit card issuer may provide you with additional rights.Here’s a look at some of the common reasons why chargebacks are issued.

Fraudulent or Unauthorized Credit Card Use

This occurs when someone who is not an authorized card user uses your credit card to purchase goods or services. This can happen if your credit card (or credit card information) gets stolen.

Product or Service Was Not Delivered or Inappropriate

If you ordered a product or service and never received it, or what you received was not as described, your first step should be to try to resolve the situation with the merchant. If you’re unsuccessful, you can then reach out to your credit card company and request a chargeback.

Return Credit Not Processed

If you returned an item or canceled a service within the return policy and never received a refund, you’ll want to first reach out to the merchant to try to get the return processed. If you are unsuccessful, you can then contact your credit card company and file a chargeback.

Recurring Billing Was Not Stopped

If you cancel a subscription service but continue to get billed despite reaching out to the merchant, this is a legitimate reason to ask your credit card issuer for a chargeback of any fees you shouldn't have been billed for.

Incorrect Charge

If the amount you were charged for a good or service is different than the agreed upon price and, despite several attempts, you’ve not been able to resolve the problem with the merchant, you can file for a chargeback.

Tips for Filing for a Credit Card Chargeback

To dispute a charge and submit a chargeback, you’ll want to first gather all the information you have on the charge, including the receipt or invoice, contract (if applicable), and any communications you had with the merchant. Next you’ll want to reach out to your credit card issuer to dispute the charge.Often, the easiest way to dispute a charge is through the bank’s website. Larger banks typically allow you to dispute a charge through the web page listing all of your transactions. You may even be able to dispute a charge through the card’s mobile app. Even if you're able to initiate a chargeback online, however, your bank may call you for additional documentation, particularly if it's a large amount.If you’re not able to submit your chargeback request online, you can call the phone number on the back of your credit card and speak with customer service. Depending on the nature of your chargeback request, your card issuer may request that you also submit supporting documentation via mail or through a form on their website.

The Takeaway

The ability to dispute erroneous or fraudulent charges is one of the biggest advantages of using a credit card for purchases. If something goes wrong — a product you order never arrives, a service isn’t as described, or your request to cancel a subscription remains ignored — chargebacks allow you to stand up for your rights as a consumer and get your money back. If you don’t currently have a credit card (perhaps due to limited or poor credit), or you’re in the market for a new one, Lantern by SoFi can help. With our online credit card marketplace, it’s easy to compare multiple credit cards offers (including credit-building cards) matched to your needs and qualifications with just one application.

Frequently Asked Questions

Can I claim a chargeback on a credit card?

What qualifies for a credit card chargeback?

Are credit card chargebacks always successful?

Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Photo credit: iStock/Kiwis

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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