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Advice

What is a chargeback—and how to dispute credit card transactions

If you've received a damaged item or never got a package that says 'delivered,' you may try to dispute it with your credit card issuer via a chargeback.

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If you paid for an item but never received it, or it arrived damaged, you may be frustrated and want your money back, justifiably. As a result, you may try to dispute it with your credit card issuer through the process of a chargeback.

Chargebacks are different from refunds, but both can result in you receiving a credit for an order that went wrong or a fraudulent charge on your account.

Below, CNBC Select reviews what a chargeback is, how it differs from a refund and how to ask for one if a delivery goes wrong or you see a red flag on your credit card statement.

What is a chargeback?

Chargebacks are a consumer protection tool that allow consumers to get their money back for fraudulent charges or purchases that don't live up to standards by submitting a dispute with their card issuer.

If you notice a transaction on your credit card account that doesn't look familiar or run into issues with a recent order, you may want to (and should) dispute the transaction. Generally, you'll have two options when disputing a transaction: refund or chargeback.

A refund comes directly from a merchant, while a chargeback comes from your card issuer.

The first step in the dispute process should be to go directly to the merchant and request a refund. This may require you to bring the item back to the store with a copy of your receipt, or you may be able to contact customer support and get a refund online.

For instance, I recently received an item from Amazon that didn't live up to standards. The item was unwrapped and said "try me out." I began the dispute process by directly contacting Amazon customer service via chat and explaining the issue. Moments later I received a refund for the item, but that may not always be the case. If Amazon wasn't willing to credit the purchase, I would have requested a chargeback with my credit card issuer.

Chargebacks should be the next step if asking the merchant for a refund doesn't work. You initiate a chargeback directly with your card issuer in the hopes of the transaction being reversed.

When to ask for a chargeback

There are several situations that qualify for requesting a chargeback, such as:

  • Fraud or unauthorized charges on your account: If you don't recognize a transaction and suspect it was from fraud.
  • Packages that were never delivered: You may receive notice that an item was delivered, but it actually wasn't.
  • Damaged or defective items: If an item came opened or missing certain parts.
  • Incorrect charges on your account: The cost of the item purchased was different than what you were actually charged (this happens most often at local businesses that enter prices manually).

Keep in mind, many credit card issuers offer $0 liability on unauthorized charges, so if you have the Citi® Double Cash Card or Chase Freedom®, you won't be liable for unauthorized charges.

How to request a chargeback

If asking the merchant for a refund didn't work, request a chargeback with your credit card issuer. Many card issuers let you dispute transactions by phone, mail or online. You may also be able to submit a dispute directly through your card issuer's mobile app.

When you submit a chargeback, you may need to include supporting documents, such as copies of a receipt, invoice, contract and any communications you had with the merchant. Anticipate that the dispute can last up to 90 days or two billing cycles, whichever is shorter.

Once you submit a chargeback request, the exact process varies depending on your card issuer, network and situation, but generally results in some back-and-forth between various parties. Here's an example of how the process may go, according to Experian:

  1. You file a chargeback request.
  2. Your card issuer reviews the dispute and will decide if it's valid or if you have to pay. If your issuer accepts the dispute, they'll pass it on to the card network, such as Visa, Mastercard, American Express or Discover, and you may receive a temporary account credit.
  3. The card network reviews the transaction and either requires your card issuer to pay or sends the dispute to the merchant's acquiring bank.
  4. The merchant's acquiring bank takes one of two actions: Sends the dispute back to the card network and says the issuer is at fault or forwards the dispute to the merchant.
  5. If the merchant gets it, they either agree to pay for the transaction or dispute the chargeback.
  6. If the merchant disputes the chargeback, there may be more back-and-forth as the merchant, acquiring bank and card issuer try to settle the matter. But if the merchant agrees to pay, the process is a bit smoother.
  7. At the end of the day, the card network decides who pays. A successful dispute will deem the temporary credit you received to become permanent.

Learn more:

Information about the Chase Freedom® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the cards prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.