American consumers discovered a new pastime during the pandemic: the credit card chargeback. Here's ... [+]
American consumers found a problematic new pastime during the pandemic: the credit card chargeback. And there's almost no industry where customers loved credit card disputes more than travel.
The numbers are "jarring," says Monica Eaton-Cardone, co-founder of Chargebacks911, a company that protects businesses from chargebacks. In a recent survey, 65% of businesses surveyed reported an increase in chargeback fraud.
"It's a particularly ominous finding because merchants had hoped that the COVID-era explosion in chargebacks and payment disputes would begin to recede as our lives returned to normal," she says. "But clearly, it's a new normal out there."
Customers are getting stuck with unexpected bills, too
From a customer's perspective, it's equally jarring.
Often, travel companies stick their customers with unexpected bills. They include tour operators or cruise lines that force customers to accept a credit even when the company cancels a tour or sailing. This summer, we've even seen airline passengers with canceled flights, where the airline charges them again to get to their destination.
These charges are wrong. A credit card dispute under the Fair Credit Billing Act (FCBA) is often the best — and sometimes the only — way to get the refund you deserve. Credit card chargebacks are complicated and confusing, as I note in my complete credit card dispute guide. But when an airline, car rental company or hotel hits you with a charge you don't deserve, they can also be your best friend.
This is part one of a two-part series on credit card disputes in the travel industry. Today we're talking about the practical remedies for travelers stuck with a bill they didn't expect. In part two, I share stories from customers who used a credit card dispute to get what they deserved.
Your chances of prevailing in a credit card dispute are pretty decent. Businesses fight only 43 percent of disputes filed against them. And only 12 percent of chargebacks get reversed in the company's favor. But there are ways you can improve your odds. These involve carefully considering the merit of your credit card dispute, using chargebacks sparingly and keeping your eyes on the clock.
And here's a shocker: A dispute may not even be necessary. You may be able to get a refund by asking politely.
Should you file a credit card chargeback?
Experts say chargebacks aren't the answer to every billing disagreement. Far from it, actually.
"A dispute is different than just asking for a refund," says customer service expert Shep Hyken. "If the airline or hotel agrees to honor a request for a refund immediately, then it's a refund. If not, it's not a credit card dispute."
The FCBA gives you 60 days to file a chargeback when you receive your credit card bill. But many cards give you 120 days or longer to file a dispute, although the law does not protect disputes filed outside the required period.
The rules allow you to dispute charges you didn't authorize. So, for example, if another guest ordered room service at your hotel and put it on your tab, you could dispute that charge. Also disputable: an incorrect charge, like if your ticket costs $120 and your airline billed you $1,200. The other big category is for goods or services not delivered. That can mean you paid for a cruise, but the cruise line canceled and pressured you to accept a voucher, which is a common problem.
Knowing the difference between a refund request and a dispute is important. Experts say you'll want to allow the business time to address the problem before disputing the charges. If the company says no, you can dispute the charges.
Filing a chargeback is easier than ever
Before online banking, you had to call your bank or credit card company to file a chargeback. Not anymore. You can file a credit card dispute on your bank's website or mobile app.
That's sometimes a problem, says Rafael Lourenco, an executive vice president at ClearSale, a software company that provides e-commerce fraud protection services. "Card issuers make it easier for customers to help themselves to a sometimes undeserved refund," he says. That allows customers to accept this easy solution instead of trying to communicate with the merchant directly to resolve the problem.
He says once you file the chargeback, time is on your side. Your cardmember agreement gives you somewhere between 120 and 180 days to file a chargeback on a credit card purchase. But merchants must respond to chargebacks much faster. Visa's latest claims resolution initiative reduced the window for merchants to respond to chargebacks from 45 to 30 days. Merchants hardly have enough time to gather enough evidence, which increases the odds that you'll win.
If you're a first-timer, you're probably a winner
If you've never filed a credit card dispute and you're thinking of doing it, today's your lucky day.
"Banks will almost always side with the consumer if this is the first time they dispute a charge," says Roy Firestein, CEO of Autohost, a company that provides dispute services. "However, people who asked to reverse multiple charges are more likely to lose those disputes if enough counter-evidence is submitted."
Some merchants use security software, which generates evidence that they use to counter a chargeback. That speeds up the process but also puts consumers, who are still doing everything manually, at a disadvantage.
Watch the clock
It seems contradictory: You want to give a business time to resolve the issue. But you don't want to wait too long, since the clock is ticking. Solution: Watch the clock and be decisive, say experts.
Chloe Choe, who publishes a personal finance blog, recalls a recently canceled flight. "I contacted the airline multiple times and was told that I'd receive a refund by a certain date, only to have that date pushed back twice," she recalls. Afraid that the airline was trying to run down the clock on her 60 days, she contacted her bank. "I filed a credit card dispute — and won," she says.
She says having all the paperwork helped. She had evidence that she'd contacted the airline. The paperwork showed that she'd tried to get a refund and that the company promised her a refund. Dispute departments sometimes view a written promise as the equivalent of a credit memo, and you win.
Remember, a credit card chargeback is a last resort
Experts say one of the keys to a successful credit card chargeback is exhausting all other options. Your bank or credit card issuer may even require that you give the company a chance to respond and fix the problem.
"Chargebacks should never be your first course of action if you are displeased with a purchase or service," says Gates Little, CEO of altLINE Sobanco, a banking site. "You should first request a refund from the merchant through their refund policy and process."
The travel company's policy is important, he says, because it outlines your rights to a refund. Some travel companies, notably airlines, have nonrefundable tickets. That makes a credit card dispute almost impossible to win.
These pro tips — carefully vetting your claim, keeping your number of claims to a minimum and watching the clock — can ensure your next credit card chargeback is successful.
Is a credit card dispute the right call?
But should you go through with it? Eaton-Cardone of Chargebacks911 says maybe not.
"Consumers are scared and times are tough. Lots of families are tightening their budgets these days. So on one hand, I get it," she says. "But the problem with filing a chargeback complaint with your bank, instead of first requesting a refund directly from the business, is that chargebacks aren't just a simple, no-harm way to get a fast refund."
She says chargebacks can punish businesses in triplicate. First, they lose the physical product. Then, they have to give a full refund. Finally, they also have to pay expensive fees and financial penalties.
Many businesses lose $3 for every $1 lost to chargebacks.
"That's extraordinarily bad news because some of the companies that are now being pummeled with post-pandemic chargebacks are the same companies who were there when we needed them during the worst days of COVID," she says. "It's grossly unfair."
Consumers have a responsibility to be honest and ethical. Filing an unwarranted credit card chargeback destroys jobs, rewards criminal behavior and inflates prices for everyone else.
In other words, while these pro tips will help you file a successful credit card chargeback, just because you can do it doesn't mean you should.
