Chargeback - Do you Make Purchases with Visa, Amex or Mastercard?

Chargeback - Do you Make Purchases with Visa, Amex or Mastercard?

Do you shop on online (or the high street) using your Visa, Amex or Mastercard credit cards? How about debit cards?


Are you aware of a protection that covers these credit cards (and also most debit cards) called chargeback?

In a nutshell, chargeback lets you ask your card provider to reverse a card transaction if you experience a problem with something you've bought.

If you've never come across chargeback, this short Unlock the Law guide will bring you up to speed. As they say, knowledge is power - in this case buying power!

What is Chargeback?

Chargeback works in a similar way to the Section 75 protection that credit card users enjoy (under the Consumer Credit Act 1974) on their purchases over £100 (and up to £30,000).

For a full rundown on Section 75, make sure you check out our Unlock the Law guide.

Chargeback isn't as well known. Unlike Section 75, it is not enshrined in law. Instead, it is part of so-called Scheme Rules, which participating banks sign up to. However (and again, unlike Section 75), it covers both debit and credit cards.

For debit cards, it applies to all goods and services purchased on the Visa, Maestro and American Express networks (although the exact rules may vary between providers).

For credit cards, again it applies to all goods and services, but is particularly useful because – unlike credit card purchases under Section 75 – it can be used where the price is under £100.

Which CARD Companies offer Chargeback?

Currently, you can make a chargeback claim for the following cards: Visa, Visa Electron, Maestro, Mastercard, Mastercard Debit and Amex.

Sounds Promising! So What Can it Be Used For?

Chargeback can be used in a whole range of situations:

  1. Failed delivery - your purchase never arrive;
  2. Supplier goes bust - the company you have bought your goods from goes into administration;
  3. Quality - your purchased goods are defective or damaged;
  4. Description - your goods are not as described by the seller;
  5. Technical - there is a processing error by your bank;
  6. Clerical error - you are charged twice for the same item (or billed the wrong amount);
  7. Fraud - you have been the victim of fraud (i.e. you didn't make the purchase in question).

Sounds Very Promising! So Are you Guaranteed a Refund?

Unfortunately not. Remember, this is not a right enshrined in law. Instead, it is an internal rule of the card providers that the banks agree to. Unlike Section 75, chargeback doesn't mean that there is joint liability with the card company!

In effect, if something goes wrong, you are asking your bank to claw back your money back from your supplier's bank (not from your supplier).

Accordingly, there is no absolute guarantee of success. In fact, sometimes the supplier concerned (whether for goods or services) might argue that you are not justified in making your claim.

How do you Give Yourself the Best Chance of Success?

Bearing in mind the above caveat, it is always worth having a go.

Firstly, you should send your complaint in writing to your bank (copied to your card provider) within 120 days of the date on which you become aware of the problem (in the case of goods, this is usually the date of receipt), and ask it to dispute the transaction.

It can then start the process of claiming your money back from the supplier's bank. It is always worth sending a copy of your complaint to your merchant, as sometimes this prompts direct settlement of a claim.

The 120 days time limit is not absolute. Some claims need to be be made later. For example, if you purchase a flight, and the airline goes bust, the breach of contract technically starts on the day that your flight was due to depart. Clearly, that might well fall beyond the 120 days "limit".

Any Else to Bear in Mind?

As always with these things, yes! Three points, in particular, are worth noting.

Firstly, in addition to the general 120 days rule, most card providers impose an absolute cut-off of 540 days from the date of your transaction.

Secondly, don't be surprised if the person you speak to at your bank says "huh?". In reality, a lot of bank staff don't know about chargeback. Be prepared that you may need to explain it to them (so keep this Unlock the Law guide handy!).

Thirdly, there is no upper limit to payouts and no lower threshold, with one exception: Mastercard stands-alone with a minimum threshold of £10.

Is PayPal Your Pal?

It depends how you use your card.

If you use your card to load money into your PayPal account, and then you make a purchase using these pre-loaded funds, you will not be covered. In this case it is the loading of the money that is considered to be the card transaction. The subsequent transaction with your merchant will not be regarded as a card transaction.

If, on the other hand, you use your card directly through PayPal (i.e. no money is loaded on your account and your card is being used to pay) then chargeback should apply.

Accordingly, if you're making a card purchase via PayPal it actually can be a good idea to empty your PayPal account regularly, so there is no credit balance. That way, when you make a card purchase, that same amount will be debited from your card. This makes it easier for your card provider to match your purchase with the debit.

Does this Tiger have Teeth?

If you're unsuccessful with your chargeback claim, then you can refer matters to the Financial Ombudsman Service.

If you do want to involve the FOS, you have to do it within six months of your final correspondence with your bank.

The great thing is that the FOS service is free. It also can look at things like standard industry practice and whether or not you have been fairly treated, so it is a very flexible option.

Overall, however, chargeback is only a cub compared to the fully-grown tiger that is Section 75. With Section 75, the credit card company itself is legally liable. With chargeback, however, you are relying on the internal policies and rules of card providers.

So, for purchases above £100, you should always think carefully about whether to use your debit card or credit card.

Related: UK Consumer Rights Legal - Legal Guides

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