Chargebacks

There is no clear-cut answer to this question as one needs to distinguish between a purchase effected where a card is present at the time of the transaction (i.e. face-to-face, where the merchant has swiped the card in the presence of the customer) and where a card is not present (i.e a purchase made over the internet or over the telephone, where the card is not swiped and the customer has not physically seen the product he had ordered).

1st Scenario: Card present – in this instance, the issuing bank (i.e. the bank which has issued the card to the cardholder) is not liable towards the cardholder (i.e. its customer) if the product malfunctions or where the customer, after purchasing the product, has a change of heart and wants his money back or wants something else instead. The customer has to take it up with the merchant directly. A prospective purchaser has to carefully check whether he/she is entitled for a refund when returning goods. The goods or services being purchased need to be checked before paying the bill. Check for specific clauses on receipts such as ‘no refunds’ clauses. It is imperative that cardholders always check the entries on their statements for possible processing errors that may have unintentionally occurred at the time of the transaction.

2nd Scenario: Card not present – in this scenario, the cardholder enjoys a range of varying degrees of rights, although each case is assessed on its merits.

Example 1 – The cardholder purchases a product online. The supplier (foreign) processes card details as to payment but the product never reaches the cardholder. The cardholder should communicate this to the supplier. If the supplier does not reverse the transaction or re-sends the same object, the cardholder has a right for a chargeback, i.e. the bank will be required to reverse the transaction. There is a time-limit for the customer to do so, usually 30 days, from the date of the transaction (i.e. if the product does not reach the cardholder within 30 days, he has to apply for a chargeback). Chargeback processes are strictly regulated by VISA/Mastercard in terms of time frames in which cases may be initiated and the time in which a merchant can reply.

Example 2 – the cardholder purchases a product online. The supplier (foreign) processes card details as to payment. The product arrives but is not the product the cardholder had ordered. The cardholder should communicate this to the supplier straight away. If the supplier does not reverse the difference, the cardholder has a right for chargeback.

A chargeback, in simple terms, is a right (not automatic) granted by the card issuer (through the international network to which the card is linked) whenever there is a breach in a contract of sale in particular situations, most of which relate to transactions where a card is not present. The chargeback process would normally involve the issuing bank (the bank which issued the card to the cardholder) contacting the international network, which in turn contacts the bank which acquired the transaction (i.e. the acquirer bank, that bank which processed the card transaction on behalf of the merchant). The merchant may reply, and may also object to the chargeback, in which case, there is some sort of dispute resolution system between the banks. If the merchant does not reply within a certain time frame (usually within 45 days), the chargeback becomes automatic.

Note: Chargeback do not extend to situations where the quality of the service or product is poor or not up to standard. Neither does it extend to situations where the claim for chargeback is not quantifiable. Customers need to check about the costs surrounding the investigative process which can range between €25 to €40 which can subsequently be refunded if the chargeback is successful.

You may also be interested in the following links:

• Using credit and debit cards – your rights explained!
• Chip & PIN
• Know your charges
• Some helpful tips to help you shield your card and money from fraud