What is a Chargeback?

Credit cards can be expensive. Not only are there excessive APRs to contend with, but every now and then there are false charges. This happens when a company incorrectly charges you for an item that you did not buy. It is also quite common for online sellers to double charge you for an item that you did buy. What can you do?

A chargeback or reversal is the simplest and most effective option a cardholder has at his disposal. As we mentioned, it is typically utilized when a customer identifies a fraudulent charge, but it can also be used when a buyer is unhappy with a legitimate purchase he has made. For example, if you buy a leather coat in a store and later discover that it is not real leather, you may want to initiate a chargeback.

Let us take a moment to go over all of the reasons that a chargeback may be used.

•The credit card holder does not recognize the transaction.
•The purchase was double charged.
•The buyer never received the item in question.
•There was an obvious error in the amount that was charged.
•The shipping charges were miscalculated.
•The buyer received the wrong product and the company refused an exchange.
•The consumer is dissatisfied with the quality of the product and believes that there was false advertising.

What happens when a cardholder initiates a chargeback? For starters, the bank or Credit Card Company will investigate the complaint. If the claim is valid, they will recoup the money owed and return it to the cardholder. Occasionally, the merchant can verify that the transaction was genuine, in which case the money will not be returned.

But more often than not, a chargeback is legitimate and it can almost always be attributed to technical errors between the merchant and the bank or service provider. By far the most common technical error is the double charge, which happens quite often in the online marketplace.

The chargeback is an essential option for online consumers. However, it is the proverbial thorn in the side of online merchants and the reason that many of them go out of business. Why is this? Well, when a chargeback is validated, the merchant will be assessed a stiff penalty by his bank or merchant service provider for the mistake. This is not out of spite. The bank or service provider has to spend time and money investigating these claims and when they refund them they must also pay a transaction fee. That is why many merchants appeal these charges if they believe them to be erroneous.

In the end, the chargeback is a blessing for consumers and a bane for online sellers. However, no one denies that they are necessary, since online billing is occasionally erratic and double billing is quite common.