What Happens When You Dispute a Transaction?Fighting Credit Card Transactions: What Happens After You Request a Chargeback?

What Happens When You Dispute a Transaction? Here's a Step-by-Step Guide Explaining How to Dispute a Charge... & When You Shouldn't Do it.

We’ve all made the occasional online purchase that didn’t quite live up to our expectations.

It’s a remarkably common thing. After all, when we can’t touch, hold, or measure the things we’re shopping for, it’s hard to get a feel for what you’re really buying. More often than not, consumers rely on detailed product descriptions and photographs to make their selections. But, as you may have guessed, that can sometimes spell trouble.

What do you do when the items you purchase differ significantly from the description you were given? What if your goods arrive broken? Or, if they never arrive at all? Even worse, what if you never even authorized the purchase to begin with?

Any of these issues may give you a valid reason to open a transaction dispute. You may not be sure what that is or how it works, though. So, let’s go over it together and see if we can get a better idea of what happens when you dispute a transaction.

What is a Transaction Dispute?

A transaction dispute, also known as a chargeback, happens when a cardholder files a formal complaint with their issuing bank against a recent debit, credit, or prepaid card purchase.

Some examples of chargeback-worthy claims include:

• Fraud or unauthorized charges on the account.
• Orders that were never delivered.
• Your merchandise arrived damaged or defective.
• Items/services that do not reflect what you purchased.
• The seller overcharged you for a purchase.

The issuer forcibly reverses the purchase, removing funds from the merchant’s account and returning them to the cardholder. Before filing a dispute, though, the buyer should attempt to work out a refund or exchange with the merchant first. Doing so can help the cardholder get their money back faster and the merchant avoid a chargeback.

The cardholder should file a chargeback only after these attempts prove unsuccessful.

Learn more about disputing a charge

Disputes Vs. Chargebacks: What’s the Difference?

One thing you might find confusing is the terminology regarding transaction disputes. We should talk about that real quick before we discuss the specifics of what happens when you dispute a transaction.

The terms “chargeback” and “dispute” can refer to the same process, in a general sense. There’s one key distinction, though: all chargebacks can be considered transaction disputes, but not all disputes are chargebacks.

This gets confusing, though, because each of the card brands has its own set of rules regarding processes and terminology. Visa, for instance, no longer uses the term “chargeback” at all; for this network, there’s no distinction between a dispute and a chargeback. It’s good to understand the difference, but it’s okay if you find yourself using the two terms interchangeably. Most people do.

What Happens When You Dispute a Transaction: 5 Stages in the Dispute Process

So, how does disputing a transaction work?

Once filed, your dispute is then turned over to the bank or card network for investigation. Your bank will typically give you a provisional refund, which will be in place until your claim can be validated by the bank.

That process goes as follows:

Transaction Dispute Time Limits

Chargeback deadlines are pretty generous on the consumer side.

There are a few exceptions to this rule that you should know about, though. For example, a Chase Bank cardholder will only have 60 days to dispute a transaction, despite the network’s limit being 120 days. Likewise, while Visa says that merchants have a 45-day response window, the Chase credit card chargeback time limit for merchants is just 39 days.

On the other hand, PayPal — which can serve as a credit card processor for merchants — allows buyers up to 180 days to file a claim. That’s 50% more time than what the major card networks allow. The merchant, however, must respond within seven days.

Generally speaking, if you have a legitimate reason to file a dispute against a merchant, you should do so as soon as possible. Depending on the circumstances and on what happens when you dispute a transaction, a chargeback could take weeks — or even months — to resolve. You should get the ball rolling sooner rather than later.

When Shouldn’t You Dispute a Transaction?

So, now you know the basics of what happens when you dispute a transaction, and also a little about how to dispute a transaction. Now, we'll discuss when you shouldn't do it.

The chargeback process exists to protect you against fraud and merchant abuse. But, in most cases, you should try seeking a refund directly from a merchant before contacting the bank.

To illustrate, here are a few scenarios in which you should not request a chargeback without contacting the merchant first:

Requesting a chargeback in any of these situations, without at least contacting the merchant beforehand, would be a violation of chargeback rules. It’s a practice known as first-party fraud (commonly referred to as “friendly fraud”).

If the seller can provide evidence that validates the transaction through representment, you will lose those funds all over again. If that happens, you could be charged fees and penalties by your bank. Depending on the severity of the situation, you could even lose your account privileges, which would negatively affect your credit score.

Make Sure You Understand What Happens When You Dispute a Transaction

So, now you know the basics of what happens when you dispute a transaction. But, the most important thing to remember about transaction disputes is that you aren’t necessarily resolving your problem by filing a dispute.

Opening a dispute places the funds from that transaction in a limbo that could last months. This is true, whether you receive a provisional refund or not. If you refer to the dispute stages above, that refund could be taken away as quickly as it was returned.

The fastest, easiest way to get your money back is to deal with the merchant whenever possible. Nowadays, many merchants encourage you to reach out with any issues immediately. This makes it extremely simple to file and receive refunds online.

Look at the Amazon refund process, for example. All you have to do is log into the app, select a reason, and then drop the item off at one of thousands of easy-to-find return locations. Simple.

Of course, there will still be situations when you have a valid concern, and can’t resolve the issue with the merchant. When that happens, you’re well-within your rights to file a dispute in such cases.