Your credit card statement arrives, and there is a charge on it that you feel is wrong. Naturally, you don’t want to pay it. How do you fight this charge? The procedure to dispute credit card charges depends on the type of dispute that you have.
For disputes with a merchant (such as receipt of defective merchandise or incomplete services), try to resolve the dispute in good faith by contacting the seller. (For most merchants, there is a toll-free number you can call shown beneath the charge.) If you cannot reach agreement, you can seek a charge-back from the credit card company, effectively reversing the purchase.
If you actually made the purchase in question, the transaction amount must exceed $50 and it must have occurred within the same state as -- or 100 miles of -- the cardholder's address. If you dispute having made the purchase, however, the transaction amount can be less than $50. In many cases, online purchases are covered – check the fine print with the merchant and your credit card company. While you have up to one year to initiate most charge-backs, it is advisable to do so within 60 days, as charge-back rights for “billing errors” under federal law expire in that timeframe.
To seek a charge-back, contact the dispute resolution number at your credit card company. Don't automatically assume the merchant will win if you have a reasonable claim. Multiple charge-back requests can trigger additional processing fees for them.
Disputes that are truly with the credit card company should be addressed there first. Examples include unauthorized charges, incorrect postings (wrong amounts, failure to post a payment or credit for returned items, etc.), and incorrectly mailed statements.
For fraudulent use of a lost or stolen card, it is important to contact them by phone immediately, identify the valid charges to date, cancel the card and have a new one re-issued. Thanks to the Fair Credit Billing Act, your liability for fraudulent credit card use is limited to $50, but you do have to dispute the charges.
Other issues may also be resolved over the phone, depending on your credit card company's policies. There is a formal path, and the more dollars are at stake, the more critical this becomes.
- Written Notification – You must write to the credit card company notifying them of the disputed charges. As discussed above, it is advisable to so within 60 days of the first bill that includes the disputed charges. Send the notification to the address for billing disputes, not the one for payment processing. For a larger dispute, it is best to send this letter with receipt notification. Do not pay the portion of the bill that is under dispute.
- Receipt of Notification – Within 30 days of receipt, the credit card company must acknowledge in writing that they received your dispute. Written confirmation should arrive even if you registered the complaint by phone. If it doesn't, call the credit card company to find out why.
- Investigation – The credit card company must resolve the issue within two billing cycles (usually 60 days) of receipt.
- Conclusion – The card company may agree with you and remove all charges. If they rule against you completely or partially, you will be responsible for at least part of the charges, along with any late payment fees and interest.
If you refuse to pay, the credit card company can initiate collections against you and report this to the credit bureaus (although they are required to pass along that you dispute the charge). Your only recourse at this point is legal action, if the charges are large enough to merit the costs.
The credit card company cannot take any action against you during the investigation, but they can deduct the disputed amount from your credit limit. Therefore, if you are disputing a large amount, your ability to use the card may be limited.
If the credit card company doesn't follow procedure on notification and investigation, or if they report you to credit bureaus before resolution, they cannot collect on a payment even if the charge is correct – assuming you can prove this. That is why notification in writing can be very important for large charges.
In conclusion, if your initial issue is with the merchant, start there, as the overwhelming majority of merchants are ethical and wish to protect both your best interests and their own reputations. Moreover, if a merchant’s chargeback rate exceeds 1% of transaction volume, they can lose their right to process credit cards entirely. This is something they wish to avoid at all costs.
Start with the merchant, therefore, and they will likely solve your problem promptly and courteously. If they don’t, however -- and your grievance is legitimate – don’t hesitate to contact your credit card company. Document all of your steps, especially for big-ticket items, and be polite but persistent. You do have leverage, so don't be afraid to use it – just use it wisely.
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