disputed transaction
Importance of Credit

A Guide to Disputing Credit Card Transactions

May 2, 2016

It’s easy to misunderstand disputed transactions—especially since they involve each party in the purchasing process: the cardholder, the merchant, and the card issuer.

So what is a disputed transaction, and when is it an appropriate step to take?

A disputed transaction is an action taken by a credit cardholder to dispute the validity of a charge on his or her account.

The sheer volume of credit card transactions that take place each day require elaborate systems be in place to monitor for fraud protection. That’s why when a transaction is disputed, a complex investigation is triggered to protect each party’s interests. Investigations can include analyzing transaction history, bills of sale and receipts, and even in-store video footage for verification.

Each year, it’s estimated that 15 million transactions are disputed. Gartner financial analyst Avivah Litan was cited in New York Times estimating that only about 20% involve actual fraud.

So, if you think you may have been the victim of one of the 3 million fraudulent transactions, or have other inaccurate charges, what should you do?

When is it OK to dispute a transaction?

When it comes to disputing transactions, there are some ground rules all consumers, merchants, and card issuers must abide by. For starters, make sure that you officially dispute an eligible transaction in writing and within 60 days of your statement date that reflects the transaction.

Billing errors are the primary reason consumers dispute transactions. Common examples are:

  • Charges for goods and services that you either didn’t accept or that weren’t delivered as promised
  • Unauthorized charges

However, a common misconception for many cardholders is that they can dispute transactions that are not due to actual errors, but to simple dissatisfaction. For instance, some consumers assume that if they receive a lackluster meal, they can file a dispute with their credit card company. But situations that question the quality of goods and services are not protected by the Fair Credit Billing Act (FCBA), which is the driving force behind consumer protection in disputed transactions.

Other restrictions include the dispute’s timeframe and even the type of card that was used. On average, consumers have 60 days from the date their creditor mailed the first periodic statement that reflects the billing error to formally dispute a transaction. Additionally, as of October 2015, many cards with chip technology are experiencing new fraud policies known as “liability shifts.” Historically, when credit card fraud was committed, it was the issuing credit card company’s financial obligation to resolve. However, with in-store purchases, the liability shifts from the card issuer to the merchant when EMV chip-enabled card readers aren’t used.

How to dispute a transaction

If you have a transaction you wish to dispute, where should you start?

As a rule, always start with the merchant. Legitimate merchants will frequently comply if you give them a chance to address your complaint. After all, it’s in their best interest to keep loyal customers satisfied.

Here are two quick tips for when you’re ready to file your transaction dispute with a merchant:

  • Write a letter outlining your complaint and send it to the merchant via certified mail. Keep a copy of your dispute letter as well.
  • Include copies (not originals) of sales receipts or other documents that support your position.

If this fails and you’re unable to resolve a legitimate issue with the merchant, then it’s time to file a transaction dispute with your credit card company. It’s important to provide detailed documentation to your creditor as well, as companies like Visa® and MasterCard® require it. At this point, your card issuer will initiate an investigation that involves the merchant. From here, you will be notified post-investigation whether or not your dispute is valid and if your funds will be permanently returned. The creditor is obligated by law to acknowledge your complaint in writing within 30 days of receiving it. So monitor your mail for an official letter.

How to protect yourself

Thankfully, there are ways to be proactive and stay on top of potential issues. One of the best is to sign up for electronic statements and monitor your account. If you’re a First PREMIER Bank credit card holder, you can do this via our mobile app. Not only does this enable you to monitor your account from anywhere 24/7, but it also lowers your risk of identity theft with fewer paper documents containing account-sensitive information floating around. If you spot something suspicious on your statement, report it to your credit card company as soon as possible.

Are you a PREMIER customer?

If you have questions about disputed transactions, contact us.

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