If you’ve purchased a good or service using a credit card and never received it, or if the item arrived damaged, then you may be eligible for a chargeback. A credit card chargeback is when a bank reverses an electronic payment to trigger a dispute resolution process.
Read on to learn more about what is a credit card chargeback, how it works, and when you may be able to request one.
What Is a Credit Chargeback?
Credit card chargebacks usually occur between a merchant and a credit card issuing bank. Chargebacks are used to reverse a payment after a billing error, unauthorized credit card use, or the failure to deliver a product or service. You can also request a chargeback when the goods or services that you paid for with your credit card you received aren’t delivered as advertised.
For example, if you ordered a red jacket, and you received a blue one, you could request a chargeback if the merchant refuses to exchange or refund your purchase.
Chargebacks can be initiated for almost any merchant that accepts credit card payments.
Credit Card Chargeback vs Refund
While both a chargeback and a refund can result in you getting your money back, they aren’t the same thing. Knowing the difference is an important part of understanding how credit cards work.
With a refund, it’s the merchant rather than the consumer that initiates the return of funds. Additionally, while the consumer deals with the merchant to get a refund, it’s the credit card issuing bank you’ll work with in a credit card chargeback.
How Does a Credit Charge Back Work?
If you have an issue with a product or service you received, or you notice a charge on your credit card statement that you don’t believe was authorized, you can initiate a credit card chargeback. Note that you can only make a chargeback within 120 days of the date of purchase.
Once you’ve contacted the credit card issuer to dispute the charge, the bank will take over the process and contact the merchant. The merchant will have the opportunity to either accept or refute the chargeback, and you may be asked to provide evidence supporting your request.
At the end of the investigation, the chargeback will either be accepted, in which case you’d get your funds back, or it will be rejected. If you disagree with the decision, you can always continue to dispute the charge through a process called arbitration.
Cash in on up to $300–and 3% cash back for 365 days.¹
Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.
When to Use a Chargeback
The Federal Trade Commission (FTC) provides protections to consumers who use credit cards, including the right to accurate billing, protection from unauthorized charges, and the right to dispute credit card charges for goods or services that are different than described. As such, chargebacks are issued for a variety of reasons.
Before proceeding, however, keep in mind that if there was an issue with your service or goods, you may consider giving the merchant the opportunity to make it right before requesting a chargeback.
Fraud or Unauthorized Use
A common reason to request a credit card chargeback is due to fraud or unauthorized use. If you don’t recognize a transaction on your credit card statement or believe someone used your card without your authorization, you may consider requesting a credit card chargeback.
If an amount on your credit card bill is incorrect, you can file for a chargeback. For example, if the merchant adds an extra zero to your bill and you can’t reach the company to have it corrected, then this would be a good time to request a chargeback — especially if the overcharge has pushed you close to your credit limit.
Recurring Billing Was Not Stopped
If you cancel a subscription service but continue to be billed afterwards, a chargeback can make sense. It can help if you have proof in hand that you had canceled the subscription already.
Goods and Services Not Delivered
Paying for a good or service that you never received is another reason to file a chargeback. If you order something that never arrives and are unable to get the company to send it or give you a refund, then filing a chargeback may be your best course of action. After all, you don’t want to potentially pay interest on something you never received, even if you do have a good APR for a credit card.
Goods or Services Were Not as Described
If you receive a good or service that was substantially different from what was described or agreed to, you can file a chargeback for the cost of that good or service. For example, if you paid to have work done on your house, but it was done incorrectly and the service provider refused to fix it, then you could request a chargeback.
However, remember that the merchant will get the opportunity to prove that the services were provided as described.
Return Credit Not Processed
If you returned an item or canceled a service within a merchant’s return policy but never received credit for the return, such as a refund, you can file a chargeback with your credit card. This can help you recoup the funds you were owed (plus any credit card interest that may have accrued in the meantime).
How to Submit a Chargeback
1. Contact Your Bank or Card Issuer
To submit a chargeback, you first initiate the process with your bank or card issuer, often through its website. Some card issuer websites allow you to initiate or process most disputes entirely online. Otherwise, you can call your card issuer to file the chargeback or request a chargeback by mail.
2. Receive Confirmation of Your Request
After you’ve submitted the chargeback request, your bank will provide written confirmation of your request. They will then either post a temporary credit to your account to cover the disputed amount or pause required payments and APR on a credit card on the disputed amount while the issue is being investigated.
3. Sit Back and Wait While Your Request Is Submitted to the Merchant
Next, the bank will submit your chargeback request to the merchant. The merchant has a certain amount of time to respond to the bank’s inquiry.
During the investigation, make sure that you continue to pay your credit card bill for the remaining charges. At the least, make sure that you’re making the credit card minimum payment. Otherwise, you’ll end up paying interest on the non-disputed charges.
4. Receive a Decision
If the chargeback is accepted by the merchant, your billing dispute will be closed and your bank will provide an account credit to cover the disputed charge. However, if the merchant rejects the chargeback request, your bank will evaluate the information and make a decision, which they will notify you about in writing. If you disagree with the bank’s decision, you can dispute your bank’s decision through the bank’s dispute resolution process.
Credit card chargebacks allow you to dispute a charge on your credit card. You can initiate a chargeback from a variety of reasons, such as fraud or unauthorized use, being billed for an incorrect amount, or encountering a situation where goods or services either aren’t delivered or aren’t provided as described. To start the process, you’ll contact your credit card issuer, and they will then reach out to the merchant. All of this is important information to be aware of whether you’re planning to apply for a credit card.
With the understanding of another facet of credit cards under your belt, you may be looking for a new credit card. Consider applying for a rewards credit card with SoFi, which offers 2% unlimited cash back when you redeem it and a lower APR when you make 12 monthly on-time payments.1
What happens when you submit a chargeback?
When you submit a chargeback, you initiate the process with your bank. The bank contacts the merchant for the request, and the merchant decides whether to accept or reject the chargeback request.
Does a chargeback hurt your credit?
A chargeback doesn’t hurt your credit in itself, but any unpaid credit card bill during the dispute process could temporarily impact your credit score. If the disputed charge or charges are large and comprise a significant portion of your credit limit, this could also negatively affect your credit score temporarily, since your credit utilization ratio will be high.
Are chargebacks always successful?
Chargeback requests are not always successful. The merchant can respond that the charge is valid and provide documentation to support the claim. In this case, the credit card issuer may deny your request for a credit card chargeback.
How much is the chargeback fee?
A chargeback fee only applies to the merchant, not to the customer. If your business has a chargeback ratio of less than 1%, the chargeback fee usually varies between $15 and $100. Businesses with more chargebacks will face higher fees.
Is it worth fighting a chargeback?
Whether it’s worth fighting a chargeback depends on a variety of factors and will vary from person to person. Consider the amount in question, the time it may take, and the reason for the chargeback request. It’s also a good idea to contact the merchant first to give them a chance to correct the problem before requesting a chargeback.
You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.
Promotion Period: 4/18/2022-6/30/2022
Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions ("Direct Deposit") into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.
New SoFi Checking and Savings customers and existing Checking and Savings customers without direct deposit are eligible to earn a cash bonus when they set up direct deposits of at least $1,000 over a consecutive 30-day period. Cash bonus will be based on the total amount of direct deposit. Entry into the Program will be available 4/5/22 to 5/31/22. Full terms at sofi.com/banking. SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC.
SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances. There is no minimum direct deposit amount required to qualify. Members without direct deposit will earn 0.70% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 04/05/22. Additional information at http://www.sofi.com/legal/banking-rate-sheet.
1See Rewards Details at SoFi.com/card/rewards.
SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back when redeemed for a statement credit.1
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Photo credit: iStock/PamelaJoeMcFarlane