Everything You Need to Know about Chargebacks

What is a chargeback? How do they work? Are they relevant to scam victims? Who approves them? And what can Finance WatchDog do to assist you in obtaining yours?

A chargeback is, in the simplest possible terms, the retroactive cancellation and refund of a charge made  on your credit card or debit card.  You request a chargeback from the bank that issued the card itself. But you can do so only under one of two conditions:

  • You did not authorize the transaction, or
  • The transaction was for goods or services that the merchant did not deliver as per a contract, receipt or some other written agreement

If you did not authorize a particular purchase, then you’re in luck. If someone stole your credit card or forged your signature on a receipt, its use constitutes fraud. In that case, you are automatically exempt from payment under the terms of the agreement you signed with the credit card company as long as you notify your bank in a timely fashion. Your bank will then approve your request for a chargeback and credit your account for the full amount of the transaction.

What Is a Chargeback for Goods? What Is a Chargeback for Services?

If you purchased merchandise that was defective when it arrived, or if the merchant did not deliver it at all, that’s relatively easy for your bank to understand and process correctly.

But obtaining a chargeback for services that the merchant did not deliver as contracted is a challenge.  In fact, it’s daunting to prove, because you really did authorize the payment. And you received something – just the wrong something.

Binary options scams and forex trading scams victimize you because they employ platforms that do not adhere to any obligatory trading rules and procedures.

Types of Chargebacks

There are two types of chargebacks: Fraud-related and service-related. Your bank might not know that.

Fraud-Related Chargebacks

The first of the two types of chargebacks is fraud. This is simple to prove and easy to understand. If you lose your credit card and someone picks it up and starts to make purchases, you’re not responsible for them. You report the loss to the issuing bank and it will then credit your account.

Another example of fraud is if you use your credit card to purchase a specific item that is never delivered. Say, for example, you buy a new computer equipped online. You clearly specified its technical specifications. Then, after you accept delivery, you open the box and find it contains an inferior model. Or a used one. Or a toaster. You call the merchant but they deny sending you the inferior model. Or the used one. Or the toaster. They just won’t help. In such a case the merchant defrauded you. Your bank will readily agree that it should reverse the transaction. You clearly deserve a chargeback.

Service-Related Chargebacks

The second of the two types of chargeback is service-related. Generally, banks tend to find it more difficult to understand the justification for a chargeback when it’s service-related. After all, unlike a clear-cut case of fraud, you are not disputing that you authorized the purchase.  You admit that you did. And you are not disputing that the merchant provided a service. What you are claiming, in contrast, is that the precise service you contracted was not provided by the merchant. Now all you have to do is to prove it.

That challenge is much easier said than done. After all, you signed a contract. In all likelihood, you also supplied the merchant with a series of additional documents. That means he can cite them to prove that you willingly entered into a business relationship with him and knew exactly what you were doing.

Does Your Bank Know There Are Two Types of Chargebacks?

In all likelihood, a number of months went by before you realized that you fell victim to a scam and contacted your bank. You didn’t alert your bank immediately, like you would do if you lost your credit card or if someone stole it. And if that’s the case, the bank will remind you that there’s a 120-day deadline for filing a credit card dispute. You’re a valued customer and they’re very sorry, they’ll say. Your time is or will soon be up and there’s nothing they can do. And, of course, thank you very much and have a good day anyway.

Compounding the problem is that the clerks assigned to your bank’s dispute department with whom you speak may not know there are two types of chargebacks. Specifically, they might not know what a service-related chargeback is. Let alone deal with one from start to finish. A common reaction will be for the bank to demand within a limited amount of time additional information that you may not have. And if you can’t provide that documentation in the time frame they expect, they’ll either leave you with the impression that they won’t process your dispute or tell you that outright.

Explaining the Two Types of Chargebacks

Unfortunately, the same bank clerks who are unfamiliar with a service-related chargeback will probably be unfamiliar with the type of service you contracted. That’s most likely when it comes to online binary options or forex scams. If so, they will probably claim that what you did − or more accurately, what you presumed you did − was play the market. If that’s what they think, they will tell you that all investors know right from the start that losing money is a real risk. After all, no bank will retroactively reverse a credit card payment to a stockbroker for shares in a company that ultimately crashed on Wall Street.

So the odds are that bank clerk’s immediate, instinctive reaction will be that you don’t deserve a chargeback for your loss, either.

Our Expertise

Given all this, why should your bank approve and process your request to reverse your transaction? They may not.  That’s where Finance Watchdog comes in. We know the rules better than the banks do.  And that’s why you need Finance Watchdog on your side.

Our strength is our expertise in being able to explain your rights as credit card holders in language that bankers understand. When necessary, we also know how to resurrect a dispute beyond the standard deadline. That’s vital in the event your bank presumed you missed it.

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