What is chargeback?
Chargeback is a transaction reversal made to dispute a card transaction and secure a refund for the purchase.
Chargeback works by the bank withdrawing funds that were previously deposited into the receipient’s - usually a retailer - bank account and putting them back into your account.
The recipient may dispute a chargeback with the bank if it can prove the chargeback is invalid.
Chargeback vs Section 75
Chargeback is not enshrined in law but is part of Scheme Rules, which participating banks subscribe to.
Debit cards It applies to all debit cards goods, although exact rules may vary between the Visa, Maestro and American Express networks.
Credit cards Chargeback is particularly useful where the cost of the goods or services was under £100 and Section 75 doesn't apply. For all credit card transactions over £100 you also have rights under Section 75 of the Consumer Credit Act.
- Chargeback is not enshrined in law but is part of Scheme Rules, which participating banks subscribe to
- Chargeback can apply if goods are damaged, not as described, or haven't been delivered
- You also have rights under Section 75 for goods costing more than £100 if paid by credit card
- You can use Section 75 if the merchant has ceased trading
When can chargeback be used?
Make a claim against your card provider
If you bought something with your card and things went wrong, you can make a claim.Start your claim
Chargeback can be used in cases of goods not arriving at all, goods that are damaged, goods that are different from the description, or where the merchant has ceased trading.
You can ask your card provider to try to claw back the money you paid, or part of it, using our template letter to make a chargeback claim.
If, for example, you ordered two items but only one arrived, you can ask for the money back on the item you didn't receive. But you can't claim back the cost of fixing a faulty item.
Chargeback doesn't mean there is joint liability on the card company. Claims must be addressed to the bank that provides your debit or credit card, which in turn will put in a request to the merchant's bank.
As a result, you could get your money back from the merchant's bank if the money is there to be recovered.
But, there are no guarantees your bank will be able to recover the money through chargeback, or that the trader will accept that you were justified in taking the money back.
The trader could argue that you're in breach of contract for not paying.
Conditions of chargeback
The main requirement for getting your money back through chargeback is evidence that there's been a breach of contract.
Time limit There is a time limit on chargeback claims - typically 120 days from when you became aware that there had been a breach of contract. When this starts depends on the specific circumstances but will usually be from the day you become aware of a problem. There is also an overall cut off point of 540 days for Visa chargeback from the date of the transaction.
Shop/online purchase In the case of tangible goods that you've purchased from a high street shop or an online retailer, you have 120 days from when you become aware of the problem, up until 540 days after the initial transaction.
Flight purchase In the case of an airline going bust after you've booked a flight, the breach of contract would be from the day the flight was due to depart. However, if an airline had told you at an earlier date that the flight would not be going ahead, the breach of contract that allows for chargeback would not apply.
If you have any trouble when putting in a claim to your credit or debit card provider, ask to speak to a supervisor.
Chargeback is not very well known about and some bank staff may not be aware of this rule.
There’s no set timeframe for your card provider to resolve a chargeback or Section 75 claim, but if you’re unhappy with the outcome of the claim, or how long it’s taking, you can complain to your provider, it then has eight weeks to deal with this complaint.
If your credit card company doesn't accept that you have a claim and refuses to pay up, you can ask for a letter of deadlock so that you can refer your dispute to the Financial Ombudsman Service (FOS).
If more than eight weeks have passed since you submitted your claim to your credit card provider, you can refer your claim to the FOS straight away without the need for a deadlock letter.
You can also approach the FOS before the eight weeks are up if your provider has given consent for you to do so.
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PayPal and chargeback
Watch out if you use your credit or debit card to load money into your PayPal account or other similar online accounts, as it is the loading of the money that is considered to be the card transaction.
If the money that you load into your account is then subsequently used to buy goods and services, that transaction is not classed as a card transaction and is unlikely to be covered by chargeback.
If you're making a card purchase through PayPal, it's best to empty your PayPal account regularly so there is no credit balance.
That way, when you make a card purchase through PayPal, the same amount will be debited from your bank account or credit card as goes immediately to the seller.
This will make it easier for your bank or credit card provider to match the purchase with the debit.