Filing credit card disputes in the coronavirus crisis

The coronavirus crisis is expected to cause an outbreak of credit card chargebacks, as consumers seek refunds for canceled travel and events and other purchases.

Credit card chargebacks could rise 50% this year in the travel and entertainment industries and more than 20% in other categories, according to Chargebacks911, an organization that helps merchants navigate this tricky issue.

Chargebacks are essentially transaction reversals. This is what happens when a cardholder disputes a charge with his or her credit card company.

Merchants hate chargebacks because they’re expensive. Every time a consumer files a chargeback, the bank that processes the retailer’s credit card transactions imposes an administrative fee that often ranges from $20 to $50. The store might also bear additional costs such as lost merchandise.

“Friendly fraud” refers to actual customers who file disputes (perhaps as a way of returning an item, let’s say). We’re not talking about identity theft here. You’re supposed to try to resolve things with the merchant first. And you should reserve chargebacks for billing disputes, not just “the shirt didn’t fit” or “I didn’t like the color.”

See related: How do I stop a chargeback for a legitimate purchase?

I accidentally filed a friendly fraud claim this month

Frustrated by empty shelves at local stores, I took my search for cleaning supplies online. I ordered $23 worth of Clorox products from a website I had never heard of before. They emailed me right away with a note that my order had been received and told me I would be notified again when it shipped.

A week later, I hadn’t heard anything more, so I emailed the company. Another week passed with no news. Then I tried calling. I left a voicemail – again, no response. After a couple more days, I disputed the charge with my credit card issuer.

My position was that I had waited more than two weeks and had made two attempts to contact the company. When I didn’t hear back, I feared this unknown website was a scam, so I filed a chargeback. What made me feel bad was when the merchandise showed up four days later.

I called my credit card issuer and explained the situation. I told them I wanted to cancel the chargeback. All’s well that ends well, I thought.

Or not – because Capital One told me it was too late to rescind the chargeback. They said the merchant had already been contacted and needs to prove the charge was legitimate. I hope they get their money back. Right now, I have the goods and the refund.

To be fair, they shouldn’t have ignored my email and phone call, and I believe I was reasonable to file the dispute after two and a half weeks of silence. Still, I’m happy to pay now that I got what I paid for.

See related: Chargeback rules for undelivered purchases

COVID-19 has upended so many of our routines

That’s why travel and entertainment are going to be flooded with the most chargebacks. I recently wrote about one such example, a hockey fan who won a $700 chargeback but was banned from StubHub as a result. I also heard from a reader, Doug, who got $8,000 back from his card company after Princess Cruises failed to reimburse him.

Again – try to resolve the situation with the merchant, and view your credit card company as a powerful backup. Credit card issuers are typically more generous than debit card issuers when it comes to disputes. Some of that is because credit card transactions really represent the bank’s money (at least until you pay them back), whereas debit card purchases are immediately deducted from your checking account.

It’s a bit more complicated than that because a lot of purchases – especially travel – are made well beforehand. The Fair Credit Billing Act says credit card holders have at least 60 days to dispute a charge after receiving their monthly statement.

But what if you paid for a cruise reservation a year ago and only now have a reason to dispute it? There’s good news in the fine print. This Mastercard document, for example, indicates that chargebacks are permitted “between 15 and 120 calendar dates from the delivery/cancellation date of the goods or services.”

See related: Events canceled due to coronavirus: How to get your money back

It certainly pays to ask

Doug did the right thing by trying to get his money back from the cruise line. But when they promised a refund within 60 days and failed to provide one, I think he was very justified to pull in his credit card company.

Unlike my modest $23 chargeback, he didn’t get the $8,000 credited right away, but it showed up about two weeks later. Expect a more thorough investigation the higher the price.

It’s important to know your rights. With air travel, for example, the Department of Transportation entitles you to actual money back if the airline cancels your flight or makes a substantial schedule change. If you, the customer, initiate the change or cancellation, then you should expect a future flight credit.

One other consideration – while it’s a nice problem to have, refunds can leave you with a negative credit card balance. If it’s a relatively small amount, you can just use it to offset other purchases. If it’s a large amount, I suggest asking the card issuer to rebate the funds via check or direct deposit.

Have a question about credit cards? Email me at ted.rossman@creditcards.com and I’d be happy to help.