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Chargeback Explained: Definition, Filing Process & Real-World Scenarios
Posted on Wednesday, June 19th, 2024 | By IndusInd Bank
A chargeback is a consumer protection mechanism that allows credit cardholders to dispute unauthorized or erroneous transactions. When a chargeback is initiated, the bank temporarily reverses the transaction amount to the credit card account while investigating the dispute. If the claim is found valid, the reversal becomes permanent, and the merchant loses the funds.
Understanding Chargebacks in Detail
Chargebacks serve as a safety net for consumers against fraudulent or incorrect charges. Common scenarios where chargebacks are applicable include
- Unauthorized Transactions: Charges made without the cardholder’s consent.
- Billing Errors: Incorrect amounts charged or duplicate transactions.
- Defective Products or Services: Goods or services not delivered as promised.
- Non-Delivery: Items or services paid for but not received.
It’s important to note that chargebacks are different from refunds. While refunds are initiated by the merchant upon the customer’s request, chargebacks are initiated by the cardholder through the bank, often when direct resolution with the merchant fails.
When to Ask for a Chargeback?
Consider initiating a chargeback in the following situations:
- Unauthorized Use: If your card details are used fraudulently.
- Billing Discrepancies: When you’re charged an incorrect amount.
- Non-Receipt of Goods/Services: If you’ve paid but haven’t received the product or service.
- Defective or Misrepresented Products: When the received item doesn’t match the description or is faulty.
Before initiating a chargeback, it’s advisable to attempt resolution with the merchant directly. If unsuccessful, proceed with the chargeback process through your bank.
How to File a Chargeback?
If you come across a charge you want to dispute for a chargeback, here are the steps that you can follow:
· Contact Customer Care
Connect with your bank’s customer care service regarding your queries/issues and share all the details of the disputed transaction with them.
· Fill out the Chargeback Form
The customer care representative might ask you to download a chargebackclaim form. Once downloaded, you can fill it out and submit it via e-mail.
· Receive Temporary Credit
Upon submission, the bank may provide a provisional credit to your account while investigating the dispute. If the chargeback is validated, this credit becomes permanent.
Also Read: What is Skimming of Credit Cards?
How Does a Chargeback Process Work?
Here is how things unfold after you file a chargeback:
- The bank informs the merchant about the dispute.
- The merchant can either accept or challenge the chargeback. If the merchant wants to challenge the cardholder’s claims, they can submit a rebuttal letter with the evidence. In the case of the former, the bank will transfer the chargeback amount to you.
- If the merchant challenges the chargeback by providing evidence, the bank will assess the evidence. It will then decide whether to uphold or reverse the chargeback.
- If the bank rules in your favour, you receive the chargeback. The earlier awarded temporary credit now becomes permanent.
- But, if the merchant wins, the temporary credit is reversed. You also need to pay the bill by the due date.
- If either party disagrees with the bank’s decision, they can appeal through arbitration. In this case, the card network (RuPay, Visa, Mastercard) can help resolve the case. The party that loses must incur fees. Also, no appeals will be accepted later.
Who Pays for a Chargeback?
When a chargeback is approved, the merchant usually bears the cost. Not only do they lose the transaction amount, but they may also be liable for additional fees imposed by their bank. This system encourages businesses to maintain transparency and ensure a smooth customer experience.
Wrapping Up: Protecting Your Finances with Chargebacks
Chargebacks are a vital tool for consumers to safeguard against unauthorized or erroneous transactions. By understanding the process and acting swiftly, you can ensure your financial interests are protected. Always monitor your statements regularly and report discrepancies immediately to leverage this protection effectively.
