Alana | Edited by Dan
Updated April 2016
There's valuable hidden protection on Visa, Mastercard and Amex credit cards and most debit and charge cards. It's called 'chargeback' and means if you don't receive the goods you bought, you may be able to get your money back.
This full Q&A guide shows you how to maximise protection and includes a free template letter for claiming.
In this guide...
While every effort's been made to ensure this article's accuracy, it doesn't constitute legal advice tailored to your individual circumstances. If you act on it, you acknowledge that you do so at your own risk. We can't assume responsibility and don't accept liability for any damage or loss which may arise as a result of your reliance upon it.
What is chargeback?
Chargeback is a little known scheme which gives you a chance of getting your money back from your bank if you bought faulty goods, a service wasn't provided, or the company you bought something from went bust and your goods weren't delivered.
It works in a similar way to Section 75, which is a legal protection if you buy something on a credit card making the credit provider jointly liable with the retailer if things go wrong. But while Section 75 only works for credit card purchases over £100, and other credit agreements, chargeback works on all the cards below.
It's important to know this is part of Visa, Mastercard and Amex's internal rules and NOT a legal requirement (which Section 75 is).
Key differences between chargeback and Section 75:
|Do banks legally have a responsibility?|
|Does it apply to all consumer rights?||No, it's more for when goods don't arrive or are faulty, rather than future issues|
|Is it free of time restrictions?||Within 120 days of purchase or expected service provision date|
|How much can be claimed?||No limit (min £10 for Mastercard)||Between £100 and £30,000|
|Can you appeal to the Financial Ombudsman if unsuccessful?|
I used the template letter to claim some charges from Moben after it went into administration and left us with two missing doors and without having the magic corner and the plinths fitted. We bought doors ourselves and arranged for a carpenter to fit them and the corner & plinths.
I modified the template letter, sent it to my bank along with the bill from our carpenter for about £600, and have just discovered a credit in my account from the card disputes for £800. Great result for us!
I read about Visa Chargeback on your web site. I'd never heard of it and no one else I know has either. I downloaded a letter to my bank and today received a full refund under the chargeback scheme in relation to the Globespan collapse. Everywhere else I looked I was told to 'forget it as I had lost my money'.
What chargeback can be used for?
Importantly, as it's asking for money back from the supplier's bank, not the supplier itself, the money should come back even if the retailer has gone bust though this isn't guaranteed. If a transaction hasn't been completed properly, the onus is on your bank to get the money back and you should get a refund.
Some possible reasons for claiming a chargeback are:
- Company goes into administration the company you purchased from has gone bust.
- Quality of item the goods were not as described or were defective.
- Non-delivery the goods were not received as promised.
- Technical issue expired authorisation or a processing error by the bank.
- Clerical error being charged multiple times or being billed for the incorrect amount.
- Fraud you have been the victim of fraud and did not authorise the purchase.
How does chargeback work?
Complain to your bank/card provider within 120 days of the purchase, and ask to dispute the transaction. It can then start the procedure of claiming the money back from the supplier's bank. It's also good practice to contact the seller (and it may speed the process up).
Some claims can be made after 120 days for example if you bought something that was for services to be provided in the future, that for some reason weren't provided.
However, even with these claims, there's a time limit of 540 days from the date of paying for the contract.
If you're unsuccessful, then contact the Financial Ombudsman to make a complaint. This is completely free and well worth doing, there's a simple claim form on its website and details on how it can help in the Financial Fight Back guide.
Chargeback is nowhere near as strong as Section 75 for credit card purchases. The key difference is that when you complain under Section 75, the credit card company itself is legally liable. With chargeback it's just about the Visa/Mastercard/Amex process, and that's nowhere near as weighty. It's also the case that you can't take the issue to court if your bank won't pay.
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Credit cards give GUARANTEED protection
While chargeback is a useful tool, Section 75 is much stronger as the credit card company is legally liable. So, to ensure you have the most protection, if you're spending over £100 it's worthwhile using a credit card. Read the full Section 75 guide for more details and exceptions to the rules.
Yet credit card companies do, of course, make their money by charging you interest. And frankly the interest cost is so large it often overrides the protection, so follow
Always set up a direct debit to pay the card off in full each month, so you'll never pay interest.
If you don't have a credit card or have debts on a card, and need another especially for these purchases so you can pay it off in full each month, then it's time to apply for a new card. In which case the two best choices are:
- A cashback credit card. These pay you each and every time you spend on them. Set up a direct debit so there's no interest. This can add £100s a year to your income, without any hassle, so you get a double boon. Full info and best buys in the Cashback Credit Cards guide.
A 0% for spending card. Borrowing in the current climate isn't a good idea. Though if you are going to spend on a card you can't repay in full, at least ensure it's as cheap as possible. A number of cards offer 0% interest for a year or more on all your spending, full info and best buys in the 0% Interest Cards guide.
If you've poor credit and can't get a credit card, read Section 75 without a credit card.