Gabe Douek

Editorial Disclosure: The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone.

What Leads To Credit Card Dispute?

One of the most stressful and frustrating experiences of our modern world is identity theft – primarily, credit card theft. There are few things scarier than checking your bank statement or online account only to find a suspicious credit card charge that no one can confirm they are authorized. When it comes to money matters, fraudulent charges can be not just scary but financially devastating to those who have low incomes.

Thankfully, there are laws in place to protect cardholders when these types of unauthorized credit card charges happen. So long as they are dealt with properly, generally speaking, the cardholder is not held responsible for paying back these fraudulent charges. 

Fraudulent charges to a credit card are any type of charge or pending payment that the cardholder did not initiate or authorize. They can pop up as any type of purchase from any type of merchant from gas stations and grocery store purchases to more high end, larger-sum expenses like plane tickets or, in the case of a credit card that’s been physically stolen, massive withdrawals of cash. These types of fraudulent charges are typically the result of credit card or identity theft. The physical card itself doesn’t need to be stolen for the credit card account to be compromised. 

Credit card numbers are compromised in many ways. Scammers surreptitiously install card skimmers onto ATMs or other POS systems that grab card information in just a few seconds. In cyberspace, there are many malware programs specifically created to steal credit card info. Cardholders who have insecure practices with card information, such as making purchases on suspicious websites, can also result in credit card information being stolen. Sometimes the cards are compromised simply by a software glitch or clerical error. Whatever the case, ultimately, it is the cardholder’s responsibility to report and dispute these charges and to remain vigilant in following up and documenting the process as well.   

Keep reading to learn some of the best practices and tips for credit card disputes and obstacles one might encounter.

The Earlier It’s Caught, The Easier It Is To Dispute 

credit card dispute

One of the most frustrating elements of unauthorized credit card charges is how easily they can slip through the cracks.

Oftentimes, a fraudulent charge, especially if it is a smaller sum, can go unnoticed for weeks or even months because the cardholder isn’t actively reviewing their credit card statements. It certainly feels a little unfair that this responsibility falls on the cardholder — especially when the charges are the result of identity theft — but that’s why being vigilant when checking credit card statements is such an important practice to develop.   

If too much time passes from when the fraudulent charge first appears on the statement and the cardholder submitting a dispute, the cardholder could be held responsible for the charges. According to the Fair Credit Billing Act, a cardholder should report any unauthorized charges or credit card billing errors to the appropriate credit card issuer within 60 days of when the statement that has the charge or error was mailed to the cardholder.

For example, say a fraudulent charge was made on May 15th and then the statement was mailed to the cardholder on June 1st. The cardholder will have until July 31st to submit a credit card dispute in writing to the credit card issuer. Beyond 60 days, the credit card issuer has no legal responsibility to handle the dispute in your favor.  

Smaller charges are even more notorious for going unnoticed or simply unreported. It’s important to report all fraudulent charges to the credit card issuer no matter how small the amount. Tiny charges of a few cents or one dollar may seem inconsequential. But these smaller sums are often just testing to see if the account is active. Once that small charge goes through, scammers will go back in for a second, much larger charge. It’s much easier to stop this process in its tracks by immediately reporting the small charge before it goes through. If the card is frozen or canceled immediately, no more charges can be applied to it.   

The best way for cardholders to ensure they catch any potential unauthorized card payments is by checking their credit card account and balance often throughout the month via an online account, rather than just waiting for your mailed statement at the end of the month. 

How to Report Unauthorized Charges 

Once the cardholder notices a charge, the very first step is to make absolutely certain that the charges are actually fraudulent. Verify with any other authorized users or joint account holders that they did not authorize the charge.

Once it’s confirmed that the charges are unauthorized, the next step should be to call the credit card issuer. This phone number should be located on the back of the credit card. If the credit card has been stolen or is otherwise missing or damaged, the contact information for the card issuer can also typically be found on a billing statement or on the card issuer’s website.

Sometimes cardholders receive emails or phone calls that claim to be their valid credit card issuer. Do not ever release credit card or other sensitive information to someone contacting you in this way, regardless of how legitimate it seems. Often, this is a scam devised to access the credit card’s security code or other sensitive information. The best way to ensure the security of sensitive financial or personal information is for the cardholder to obtain the correct phone number and initiate contact with the credit card issuer. 

Once the credit card provider is contacted and the dispute is reported, generally, they will cancel the compromised card and reissue a new credit card with a different account number. Once fraudulent charges are reported via phone, it’s good practice to follow up with a dispute letter breaking down the charges. Be sure to reference the phone call and always provide the names of any representatives who handled the report. A follow-up letter can go a long way towards protecting a cardholder’s rights. 

Some credit card issuers will require a cardholder to attempt to resolve the fraudulent charges with the merchant first. The merchant information can typically be found on the credit card statement. However, it’s important to be aware that sometimes the merchant information is misleading or just plain made up as part of the scam. If this is the case, the cardholder will have no choice but to resolve the unauthorized charges through the card issuer. 

Cardholder Rights and How to Protect Them

According to federal law, a cardholder can be held liable for up to $50 of fraudulent charges made before the dispute is reported. However, many credit card issuers have policies in place that remove the cardholder’s liability for such charges. The Fair Credit Billing Act further protects cardholders by stating that they will never be liable for fraudulent charges made while the cardholder still physically has their credit card. This means that if the credit card account information is compromised in some way other than being physically stolen, the cardholder is never liable for those unauthorized charges.

Typically once a credit card dispute has been reported, the credit card issuer will remove unauthorized charges from the account. While this process is happening, the cardholder is not required to pay the disputed aspect of the credit card’s balance. The card issuer legally cannot charge fees or interest on the unpaid balance unless it is determined the charges are not actually fraudulent. 

From here, it’s just a matter of waiting for the unauthorized charges to drop and the new credit card to arrive in the mail. But occasionally, there may be more issues that will pop up even after the dispute is resolved.

Merchant Issues After a Credit Card Dispute is Resolved

Occasionally, cardholders will have to deal with a merchant attempting to charge the account even after the dispute has been resolved in the cardholder’s favor. But how can this happen, legally? If the charges are simply shifted from the credit card issuer to the merchant, it can turn into a tricky situation if the merchant sends the charges to collections. 

According to the Truth in Lending Act, cardholders have the legal right to dispute credit card charges for billing errors and that includes any time “property or services are not delivered to the consumer as agreed.” It also outlines the card issuer’s legal responsibilities when disputes are reported. They are typically required to look into and resolve disputes within two billing cycles.  But the Truth in Lending Act does not have any details on what the merchant’s role is in this process. How any given merchant responds to credit card disputes is outlined in the merchant agreements they sign up for when they begin accepting credit cards as payment. 

If a credit card dispute is resolved in the cardholder’s favor, merchants may still try to collect from the cardholder. They can attempt to do this typically by showing some sort of proof or documentation that the charges were actually valid. If a credit card charge is refunded, most payment processing systems simply will not let the merchant attempt to charge the cardholder again. 

But that won’t necessarily deter some merchants from attempting to collect from the cardholder. There are surprisingly few restrictions in merchant agreements when it comes to hassling cardholders for payments of unauthorized charges after a dispute has been resolved. Very few major credit card providers have policies that restrict this practice. 

A big determining factor in whether a merchant can accost a cardholder after a credit card dispute is what the reason for the refund is. In a truly fraudulent situation where the cardholder does not receive the goods or services typically, merchants cannot try to collect directly from the cardholder. But occasionally this can be used by cardholders to try to manipulate the system to keep goods while also receiving a refund by claiming the charges are fraudulent. 

Be Vigilant, Even After The Credit Card Dispute is Resolved 

One of the most important things to remember when it comes to protecting sensitive financial information is to be vigilant. Pay attention to the credit card account balance and not just when the billing statement comes at the end of the month. Using caution with where and when the credit card is used is one of the best preventative measures when it comes to identity theft. 

Once the cardholder does encounter an unauthorized charge or charges on an account, that vigilance should continue throughout the entire credit card dispute process and beyond. Even when it seems like things are going simply, it’s important to be prepared in case a merchant tries to push the charges back on the cardholder. 

Any cardholder reporting unauthorized charges will need to be sure they can back up their claims with thorough documentation. And it’s worth holding onto that documentation for the future, just in case. Having hard evidence of the entire reporting and refund process can be the determining factor on whether a cardholder keeps the money that was returned after a credit card dispute is resolved. 

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