This is an excerpt from Dollar Scholar, the Money newsletter where news editor Julia Glum teaches you the modern day money lessons you MUST know. Don’t miss the next issue! Sign up at money.com/subscribe and join our community of over 160,000 scholars.
I was aimlessly scrolling through Instagram recently when my eye caught an ad for an item I knew immediately I had to have: a white t-shirt covered in cartoon frogs.
“Damn, I love frogs,” the shirt proclaimed in block black letters, and damn I do, so I bought it. On my phone, I clicked through to the website and entered my credit card information. A few days later, the shirt arrived in my Brooklyn mailbox in all its amphibious glory.
I love it – and the looks I get from passers-by wearing it outside – but I’ll admit the retailer I bought the shirt from is super sketchy. However, I felt safe ordering because I knew that the credit card I paid for it with would protect me from losing all my money to a frog-possessed scammer.
But to calm myself, I decided to research credit card disputes. Allow me to share my newfound wisdom…
When should I file a credit card dispute?
Let’s start with a definition. Credit card disputes are exactly what they sound like: cases where someone disputes a charge on their credit card. Usually, that’s either because they didn’t authorize the charge, or they never received the promised goods or services, says Madison Block, senior marketing communications associate at nonprofit agency American Consumer Credit Counseling.
Disputes basically boil down to “writing down” that there is a mistake and “needs to be reversed,” she adds.
The first type of dispute – cheating – is relatively simple. Imagine getting a notification from my banking app that there’s suspicious activity on my account, or finding charges on my credit card statement that I don’t recognize. I don’t need to panic; I am protected by the Fair Credit Billing Act, a law that went into effect in 1974.
The law states that, in general, I can dispute charges over $50 within 60 days of receipt of the invoice. In addition to unauthorized charges, billing errors can also include incorrect amount charges and incorrect date charges. (The law limits my liability for unauthorized charges to $50, although most credit cards offer a $0 fraud liability, meaning I’m not responsible for unauthorized charges.)
If I suspect fraud, I should send a letter to my credit card issuer explaining the situation. They escalate my concerns to the seller who then has 30 days to acknowledge and address my complaint.
Block recommends that I also freeze my account, file a police report, and contact the credit bureaus so they can preemptively flag my credit report with a fraud alert.
The other main type of argument is a little more subjective – and a little more applicable to my life.
Chaim Geller, the founder and CEO of helpmebuildcredit.com, says I can file a dispute if I feel like I didn’t receive the promised good or service.
For example, if I’ve hired a carpet cleaner and still find stains on my carpet after it’s gone, I can object. If I cancel my Netflix subscription in April but am still charged in June, I can appeal. If I order a big red shirt and get a small blue one, I can object.
This is an especially important resiliency in the age of internet shopping, where “anyone can buy a GoDaddy domain,” says Geller.
He adds: “Shopping with a credit card gives you the peace of mind that if something goes wrong, if you’re not happy with the purchase, if there’s fraud, if you’re overcharged, you’ll get your money back…
I have to give my creditor details like the date of the incident and “what’s your side of the story,” he says. I may also be asked to provide documentation (such as an email confirming that my Netflix subscription has been canceled). As with the fraud cases, the creditor then escalates the dispute to the merchant, who investigates and responds. I am not liable for the fee during the opposition proceedings.
If the merchant can provide their own proof that they delivered the good/service – such as a tracking number proving that my big red shirt actually arrived at my address – then the case will likely be closed and I won’t get it my money back. If this is not possible or does not respond in a timely manner, the case will likely be closed and I will get my money back.
Businesses generally want to minimize the number of these disputes, also known as chargebacks. Your solution costs money and time. Merchants can also incur fees or suffer reputational damage (both with customers and service providers) due to too many chargebacks.
Geller points out that from a consumer perspective, people can be afraid to dispute charges because they think the credit card company will close their account. But that’s against the law. Even several disputes – i.e. within the scope of what is reasonable – are fine.
“Under normal circumstances, if you find a wrongful charge, deny it. The worst that can happen is that you lose the argument,” he adds.
However, Ginger Stands, a card transactions specialist at iQ Credit Union, warns against taking any disputes at random.
“If you claim every six months that Comcast didn’t give you a refund, they’re going to ask, ‘Why do you keep suing Comcast? Is Comcast difficult or just don’t want to deal with it? She says.
The final result
Disputing credit card charges can be a good way to protect myself in the event of fraud or if a merchant doesn’t ship what I ordered. But it’s definitely more for cases where I don’t get an item right away or get it wrong – not for cases where I’m not happy with an item.
Additionally, Stands says I should always try to resolve my issue directly with the company (ie contact customer service) before taking the dispute route.
“You want to use a dispute with your bank as a last-ditch effort to get your money back,” she adds.
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