Disputing a Transaction: How to Fight Unfair Charges

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Money has changed a lot throughout history, and especially in the digital age.

Today, more and more of our transactions are becoming cashless — digitized first via the invention of credit and debit cards, and, more recently, technologies like digital payment platforms (think Apple Pay and Google Wallet) and cryptocurrencies.

A somewhat unexpected benefit of that shift is that consumers now have an added layer of protection to many of the transactions they make. When you use a credit or debit card, you add a middleman to the transaction — in the form of a bank or other card issuer — who has the power to reverse a transaction in certain circumstances. And with that, disputing transactions has become a tool consumers can use if they encounter unfair charges, whether they come from fraud, shady business dealings, or just a dispute between the seller and the consumer.

While there are many cases in which disputing a transaction is a legitimate step consumers can and should take, there are also rules involved to make sure consumers can’t abuse the system to get money back for no reason.

If you’ve ever wondered when and where you should dispute a transaction, and how you can use disputes to protect yourself against unfair charges, this is the guide for you. Read on to learn everything you need to know about what it means to dispute a transaction, how to dispute a purchase, when you should take that step, and what you can do if your dispute is denied.

What Disputing a Card Charge Means

Disputing a charge can also be called a “chargeback.” That means you’re letting your bank or card issuer know there’s a problem with a charge, and it’s possible it could result in the bank or card issuer forcing a reversal of the charge.

The ability to dispute a charge came about in the 1970s, when credit cards were just becoming a prominent payment option for consumers, but many people were wary of them because they worried about getting stuck with the bill for fraudulent charges. Congress addressed this in the Fair Credit Billing Act of 1974, which created the option for consumers to ask their banks to replace any funds that were taken from their accounts because of fraudulent transactions. Under the new law, consumers could even ask their banks to forcefully take back money from a merchant to repay them if the charge were unfair or fraudulent — or even in the event of a disagreement about goods or services.

Being able to dispute credit card charges gave consumers a new kind of safety net that didn’t exist when they used cash or checks, resulting in a huge boost to credit cards’ popularity in the ‘70s. Today, the average American has 2.6 credit cards.

It’s also possible to dispute charges when you use a debit card, but it’s not as easy, since debit cards aren’t specifically covered under the Fair Credit Billing Act of 1974. If you run your debit card as credit (meaning you sign for your purchases instead of inputting your PIN), the law still applies. But if you use your PIN and run the card as debit, whether and how you can dispute the charge is up to your bank’s policies and procedures.

When Can You Consider Disputing a Charge?

In some circumstances, disputing a charge can actually hurt you. These guidelines can help you determine whether you might want to consider disputing a charge, but know that only you know the ins and outs of your specific situation, and if you’re not sure how to proceed, it’s always a good idea to consult with a legal or financial expert who’s familiar with the details of your own situation.

When You Might Consider Disputing a Charge

According to the Fair Credit Billing Act of 1974, these are the situations in which you are within your rights as a consumer to dispute a charge on your card:

There are charges on your card that you didn’t authorize, whether it’s because your card was lost or stolen, a merchant charged you for a product or service you didn’t buy, or any other reason.
You never received the products or services you paid for.
You received the products or services you paid for, but they were damaged, defective, or different from how the seller described them to you.
You were charged another recurring fee after you canceled a subscription.
You were charged multiple times for the same purchase.
You were charged the wrong amount for a purchase.
You were charged in the wrong currency.
You returned an item, but the seller didn’t issue you a refund.

However, just because your situation matches one of the scenarios above doesn’t mean you should immediately go to your bank to dispute the charge. The only situation where you should go straight to your bank or card issuer is if you see unauthorized charges and you think your account information has been compromised. Otherwise, the first person you need to contact is the seller.

There’s an important reason for this. Disputing a charge is a legitimate tool consumers can use to protect themselves, but, in the wise words of Spider-Man’s Uncle Ben, with great power comes great responsibility. Disputing a charge can actually hurt a seller in a number of different ways:

If the bank forcefully reverses the charge, the seller loses their merchandise and their money, meaning they basically pay double for what they sold you.
Sellers also generally have to pay administrative fees to the bank or card issuer when this happens, meaning the financial consequences can be even worse.

This is why disputing a charge is meant to be a last resort for consumers, only to be used if they’ve tried to work out their problems with a merchant, and that merchant is being shady or unfair.

When Disputing a Charge Might Hurt You

Unfortunately, not everyone follows that advice. There are people out there who abuse their ability to dispute charges, and what’s meant to be a protective tool can be overused, resulting in consequences for both sellers and consumers.

“Friendly fraud” is a growing problem in our digital world — that’s when someone disputes a card charge in a situation that doesn’t warrant it. Not only does friendly fraud abuse the dispute system; in some cases, it can actually be illegal.

Here are all the cases in which disputing a charge may not be the best action for you to take:

You want to keep an item for free by getting your money back.
You have buyer’s remorse.
The return process seems like too much work, so you’d rather not do it.
You don’t want to pay for shipping and handling or a restocking fee to return something you bought.
You want to return something you bought, but you waited too long and the seller’s return window has closed.
You forgot about or don’t recognize a charge on your card, but you haven’t investigated it to see if it was legitimate.
You feel like delivery took too long for an item you ordered.
You don’t want to pay for a charge that you actually did authorize.

If your reasoning for disputing a charge is legitimate and you don’t know how to start that process, read on. We’ve got the step-by-step guide you need for how to dispute a charge — and what to do if your dispute doesn’t work to get the justice you deserve.

How to Dispute a Transaction: Step By Step

There are specific steps consumers need to take in order to dispute a transaction the right way. If you’re new to the process, here’s how it works.

Step 1: Contact the Seller

Your first step should always be to try to work out your dispute with the merchant directly — that’s whoever you were using your card to pay, whether they sell physical goods, a service, or something else. Reach out to them and explain your problem, but make sure you do so in writing (email is a good option) in case you need to show proof of this interaction later. If they can’t help you (or if they refuse to) you can move on to Step 2.

Note: The one exception to this step would be if you see unauthorized charges on your card from a merchant you don’t recognize. This could be an indication that your account has been compromised, especially if your card was recently stolen or you lost it. If this happens, don’t attempt to contact the merchant — go straight to the card issuer and tell them you think you’re a victim of fraud. They’ll lock down your card to prevent more purchases and tell you what steps to take next.

Step 2: Collect Any Documents or Evidence You Have Related to the Dispute

Once you dispute a charge, the card issuer is likely going to want documentation that shows what happened and why you should get your money back. Collect that evidence now so it’s ready when you need it. Some good things to have handy:

The receipt from the purchase
Any written communication you’ve had with the seller
Evidence of a faulty product, like photos or videos
Any other proof you can think of that supports your dispute

Collect as much evidence as you can think of. When disputing a charge, it’s better to be overprepared than underprepared.

Step 3: Contact the Credit Issuer

The next step is to let your credit card issuer (or bank, if the charge was on a debit card) know that you’d like to dispute a charge.

The exact process for this will vary depending on who issued the card. Some companies will have an option for disputing a charge right from your card statement either in online banking or in their mobile app. Others will require you to contact them by phone.

If you’re not sure how to start the dispute process, call the service number on the back of your card and tell a representative you’d like to dispute a charge. They’ll be able to either help you start the dispute process on the phone, or direct you to the correct place online where you can send in your dispute information.

Step 4: Wait While the Credit Issuer Investigates Your Claim

Once you’ve submitted your dispute and submitted whatever evidence you have, the credit issuer will start its investigation. Typically, what will happen is the credit issuer will go over all the information you’ve provided, and then might also reach out to the merchant for their side of the story, before coming to a decision about who’s in the right. If they decide the merchant acted in good faith, they may refuse your dispute, in which case you can skip Step 5 and go to the end of this article. But if they find in your favor, go ahead to Step 5 instead.

Step 5: Receive a Refund Back to Your Account

If the bank decides your dispute was warranted, they’ll replace the funds in your account that you spent on the transaction in question. They may do this by forcefully withdrawing the funds back from the merchant’s account. For this reason, getting your refund may take a while. It may also happen instantly. It mostly depends on the credit issuer and their own policies and procedures.

What Do You Do If a Bank Refuses Your Dispute?

If a bank or credit issuer declines to refund you after you’ve disputed a charge, do your options just end right there?

No!

Consumers have rights, and if you still believe your dispute is valid and you deserve a refund, there are other options for you to explore.

One of these is consumer arbitration, a process that involves an independent mediator (called an arbitrator) who meets with you and the merchant to help you resolve your dispute. Arbitration can seem like a complex, time-consuming process, but that’s where we come in! FairShake can help you start the arbitration process and help you get justice. Learn more with our guide to consumer rights and arbitration.