A chargeback is possible for online purchases - but there are limits to how you can use it.
A chargeback is possible for online purchases - but there are limits to how you can use it.
Opinion by Diana Clement
Diana Clement is a freelance journalist who has written a column for the Herald since 2004. Before that, she was personal finance editor for the Sunday Business (now The Business) newspaper in London.
Have you been ripped off by an online merchant? Charged twice? Or your credit/debit card used fraudulently? There is a little-known service from Visa and Mastercard that may help get your money back.
It’s called a “chargeback”. This is where your bank/credit card company attempts to reverse the payment.Many consumers don’t know chargebacks can be done.
I’ve often wondered about chargebacks when I’ve seen unidentified charges on my credit card statement. I’ve never needed one in the end because I realise quickly that although the charge is from a name I don’t recognise, I did make the payment. A common complaint to banks is about EziDebit, which it turns out is often used for gyms such as Jetts, and ACNewcoreOnline or EPathway, which are often council payments. Chargebacks are for purchases you didn’t make, not simply ones you don’t recognise.
In one case considered by the Banking Ombudsman, the cardholder had been drugged and beaten up in a bar scam, but because his PIN had been used for $15,000 of transactions and CCTV images showed the victim was present in the bar he couldn’t get a chargeback.
Likewise, online scams are not a reason for a chargeback. Financial Services Complaints Limited (FSCL) considered one case of “Ferdinand”, who used his credit card to buy cryptocurrency through a trader who then offered to manage the investment. Ferdinand did receive his Bitcoin bought with the credit card but lost it when he deposited it back with the traders. That meant it wasn’t the original credit card transaction being disputed. In its “insight for consumers” about the case, FSCL noted that “The circumstances in which consumers can recover funds spent on a credit card are limited. Consumers shouldn’t rely on being able to get a refund in place of carefully considering the trustworthiness of who they deal with online.”
A more common reason that doesn’t cut it for chargebacks is for recurring payments after free trials. Typically we want to try out a service, such as streaming, but to get the 30-day trial, we need to enter credit card details. It’s common to forget to cancel the service at the end of the free period. This isn’t a reason for a chargeback unless you have proof of cancellation.
Some consumers turned down by their banks for chargeback, have had a valid case. I was pleased to see that the Banking Ombudsman sided with “Morgan”, who didn’t receive concert tickets bought via Viagogo. Morgan’s bank initially refused a chargeback but had to pay once the Ombudsman reviewed the case.
Chargebacks are also an issue for small business owners. Where a chargeback results from fraud, the business owners are innocent victims who may be able to little afford the loss. Visa has good advice on its website.
Even if you have valid reasons to request a chargeback there is no guarantee you’ll get your money.
I’ve started thinking about chargebacks lately thanks to a trend emerging overseas of unhappy Airbnb and other rental guests using chargebacks to get refunds.
For the record, simply changing your mind about a purchase or deciding that an Airbnb or hotel room isn’t up to standard, is unlikely to be viewed by New Zealand banks (and the credit card companies that process the chargeback) as an acceptable reason. An online travel booking firm failing to refund, however, is a reason to ask for one.
Here in New Zealand, most chargebacks relate to online orders that don’t arrive or to defective or substandard goods. Other scenarios for a chargeback are recurring payments continuing after cancellation, being charged twice for the same transaction or cards being used fraudulently.
Getting the money back is not a given. Sometimes the other party’s bank refuses to play ball. The process is not quick and can take 30 days.
Before applying for a chargeback, the bank usually requires customers to contact the merchant first to try to resolve the issue.
Where chargebacks are refused, both the Banking Ombudsman scheme and FSCL can consider complaints.
Not all complaints succeed and quite a few seem to be related to issues such as online gambling, trading losses and scams, where the cardholders have in fact authorised the payment but later changed their minds.
