What Does Disputing a Charge Mean and How Does It Work?

A charge dispute is a formal request made by a cardholder to their bank or credit card issuer to reverse a transaction. This action is typically initiated when a consumer believes a charge on their statement is incorrect, unauthorized, or for services not rendered as expected. It protects consumers from erroneous or fraudulent financial activity.

Understanding Charge Disputes

Consumers might dispute a charge for various reasons, often involving issues with a transaction or a merchant. One common scenario involves unauthorized transactions, where someone uses the cardholder’s account without permission, a situation often referred to as fraud. Another reason for disputing a charge can be an incorrect amount or a duplicate charge appearing on a statement.

Sometimes, a dispute arises because goods or services were not received as described, or perhaps not received at all. This can include situations where a purchased item is damaged, defective, or missing parts. If a consumer cancels a subscription or service but continues to be billed, disputing the charge provides a way to address the ongoing charges.

Preparing to Dispute a Charge

Before formally initiating a dispute with a bank or card issuer, cardholders should first attempt to resolve the issue directly with the merchant. This direct communication can often lead to a quicker resolution without needing to involve the card issuer. When contacting the merchant, it is helpful to have specific details ready, such as the order number, transaction date, and a clear description of the problem.

Document all interactions with the merchant. This includes noting the dates and times of conversations, the names of representatives spoken to, and summaries of what was discussed. Saving emails, chat logs, or any other written communication can serve as valuable evidence.

Gather all relevant supporting documentation. This evidence can include receipts, order confirmations, and screenshots of product descriptions or advertisements. If applicable, proof of return shipping or cancellation confirmations should also be collected. Having these materials readily available will streamline the dispute process when contacting the card issuer.

The Charge Dispute Process

Once preparatory steps are complete, a cardholder can formally initiate a dispute with their bank or credit card issuer. This can typically be done through various channels, including online banking portals, over the phone, or by sending a formal letter via mail. The Fair Credit Billing Act (FCBA) requires a written dispute to be sent to the credit card company within 60 days after the statement containing the error was sent.

Upon receiving a dispute, the card issuer is required to acknowledge it within 30 days. The issuer then conducts an investigation into the claim, which may involve reviewing transaction records and contacting the merchant for their perspective and evidence. During this investigation, the card issuer may issue a provisional credit to the cardholder’s account for the disputed amount. This temporary credit allows the cardholder to avoid paying the disputed amount during the investigation.

The card issuer has up to two complete billing cycles, but not more than 90 days, to complete their investigation. Throughout this period, they are not allowed to charge interest on the disputed amount. The card network, such as Visa or Mastercard, also has specific timeframes for merchants to respond to disputes, often ranging from 20 to 45 days.

Resolving a Charge Dispute

After the investigation concludes, the card issuer will inform the cardholder of the outcome. If the dispute is found in the cardholder’s favor, the charge is permanently reversed, and any provisional credit issued becomes permanent. This means the cardholder is no longer responsible for the disputed amount. The issuer will also credit any related finance charges to the account.

Conversely, if the dispute is denied, the original charge stands, and any provisional credit previously granted will be reversed and reapplied to the cardholder’s account. The card issuer is required to provide a written explanation for the denial. In some instances, a dispute may result in a partial resolution, where only a portion of the disputed amount is credited back to the cardholder.

Should a cardholder disagree with the issuer’s decision, they may have the option to appeal the outcome. The issuer will provide information on how to pursue an appeal and may require additional supporting documentation.