Chargeback refunds

Chargeback on Visa, Mastercard & Amex
Little-known card purchase protection which can get £1,000s back

Credit, debit, and charge cards come equipped with a valuable safeguard known as ‘chargeback’. This protection kicks in when you’ve paid for goods or services but haven’t received them, and the retailer is unwilling to issue a refund. Understanding the circumstances under which chargeback can be utilized is crucial for ensuring you can reclaim your money. Below, we cover all the details, along with providing a complimentary template letter.

– While extensive measures have been taken to verify the accuracy of this article, it should not be construed as personalized legal counsel. Should you decide to act based on its contents, you acknowledge that you do so with full awareness of potential risks. We cannot assume responsibility or accept liability for any consequences, including damages or losses, arising from your reliance on this information.

What is chargeback and when can I use it?

If you don’t get something you paid for by credit, debit or charge card and the firm is refusing to refund you, you can ask your bank to ‘reverse the transaction’ and get your money back via chargeback.

It’s part of Visa, Mastercard and Amex’s own rules, and your bank basically asks for money back from the supplier’s bank. Because it gets the money from the supplier’s bank and not the supplier itself, the money should come back even if the retailer has gone bust – though this isn’t guaranteed.

Chargeback works on all the cards below.

• Debit Cards
• Prepaid Cards
• Credit Cards – Under £100 only. If its over use Section 75 instead.

When can I use chargeback (and when won’t it work)?

The main requirement for getting your money back through chargeback is evidence that there’s been a breach of contract (for example, you didn’t get what you paid for) and the firm will not give you a refund. You must try to get a refund from the firm first, before you try chargeback.

Here are the circumstances where you could ask your provider to to give you a refund via chargeback:

+ If the company goes into administration – the company you bought from has gone bust.

+ If the quality of an item is in question – the goods were not as described or were defective.

+ For non-delivery – the goods you’ve paid for were not received as promised and the company refuses to refund you.

+ If there’s a technical issue – such as expired authorisation or a processing error by the bank.

+ If there’s a clerical error – being charged either multiple times or for the wrong amount.

+ In the event of fraud – you have been the victim of fraud and did not authorise the purchase.

However, you WON’T normally be covered in the following circumstances:

– For problems that emerge a long time after you’ve got the items. To use chargeback, it usually must be within 120 days of your payment. However, Visa and Mastercard have confirmed that in the case of future-dated items, such as airline tickets or sport matches, the 120 day time limit begins once you were due to receive the goods or service.

– When buying via PayPal. Though there’s a way around this.

– When you only pay the deposit on the card. With chargeback, you only get back the amount you originally put on the card. That makes it different to Section 75, which pays out the full cost even if you’d just put a 1p deposit on your card, and paid the rest in cash.

How much can I claim for?

It doesn’t matter how much you spend on a card or what you spend it on; if you run into a dispute that chargeback can help with, the sum will be covered. While there’s a £10 minimum spend if you’ve bought goods with a Mastercard card, no such terms exist with Visa or American Express.

Should I use chargeback or Section 75 (or try both)?

Chargeback is one of two avenues you can use if you think you’re entitled to a refund and you paid by card – the other is Section 75. There are two key differences between the two:

• Section 75 is a legal right for credit card purchases – chargeback isn’t. Section 75 of consumer credit legislation establishes a shared liability between the credit card issuer and the retailer in case of issues. In contrast, chargeback operates under a framework of rules voluntarily adopted by participating banks. While chargeback offers a practical recourse for refunds, Section 75 holds greater weight in safeguarding credit card transactions due to its legal backing.
• Chargeback is for debit AND credit cards and can be used on any amount – Section 75 only applies to credit cards and for certain amounts. Chargeback becomes especially beneficial when the value of the goods or services falls below £100, as Section 75 protections do not extend to such transactions. Therefore, if you’ve used your debit card or credit card for a purchase amounting to £100 or less, your only recourse for a refund is through the chargeback process.

However, where you have paid on a credit card for goods or services over £100, you may be able to seek a refund via either route (see below for more on this).

So to help, here’s a table that outlines the principal differences of each:

Covered by EITHER chargeback OR Section 75?

There are situations where chargeback provides coverage but not Section 75, and vice versa. In such instances, your course of action is straightforward: utilize the available avenue for complaint.

For instance, if you made a purchase with a debit card, spent under £100 on the item, or bought something in someone else’s name (such as a gift subscription or plane ticket), your protection is exclusively through chargeback. Therefore, refer directly to the process for initiating a chargeback claim.

Conversely, if you used a credit card to pay a deposit and supplemented it with cash (totaling at least £100), or if you made a credit card purchase a considerable time ago (typically within 120 days), your coverage falls solely under Section 75. For instructions on how to proceed with a Section 75 claim, please consult our dedicated guide.

Covered by BOTH chargeback AND Section 75?

In this case, you have a decision to make about which route you try first.

If you qualify for both chargeback and Section 75 claim, and you think your claim is clear-cut (for example, your holiday has been cancelled, or you bought something online that never arrived), it makes sense to try chargeback first.

“Even if you actually have a credit card and qualify for Section 75, I wouldn’t ask for that at this stage. I would ask for a chargeback. That’s because under the chargeback process, which is part of the Visa, Mastercard and Amex rules, your bank is asking for money back from the holiday firm’s bank, which your bank is unlikely to have an issue doing.”

If chargeback doesn’t work, you can then try a Section 75 claim. It makes sense to try it this way round, as unlike chargeback, there’s no time limit on Section 75 claims.

However, even if you decide to try it the other way round, don’t worry as all is not necessarily lost. If you make a Section 75 claim that gets rejected, and the time it took means you’ve missed the deadline for a chargeback claim, you can complain to the Financial Ombudsman.

It told us it will look at how likely they think it is that a chargeback claim would have been accepted, had you had the chance to make it. If it rules that your claim was likely to be successful, you should still get your money back (though it might take a while).

How to get chargeback protection when using PayPal

In many cases, PayPal functions as an intermediary. If you fund your PayPal account using a debit card and then use those funds to make a purchase for which you don’t receive the product or service, you won’t have the protection of chargeback.

However, if you deplete your PayPal balance and directly use your linked debit card to buy something, the transaction will clearly display the precise amount deducted from your account. This money goes directly from your account to the seller’s account.

Ultimately, the key factor is how easily your provider can match the debited amount from your account to the specific purchase, even when using PayPal. This increases the likelihood of qualifying for a chargeback.

It’s important to note that chargeback is not mandated by law and is not guaranteed in every instance.

Warning! Don’t use PayPal to pay on a credit card – you’re losing valuable Section 75 rights. For more info, see our PayPal warning guide.

How do I make a claim?

If you’ve hit a roadblock with the company you bought from, whether they’re unwilling to refund a duplicate payment or unresponsive, it’s time to initiate the chargeback procedure. However, bear in mind:

– You can only start a chargeback claim when you’ve exhausted all other avenues with the retailer.

The chargeback process is simple – all you have to do is contact your bank and tell it you want to make a claim through the Chargeback scheme. If you’ve an HSBC Mastercard, for example, complain to HSBC, not Mastercard. Then:

1. Give full details of the transaction you want refunded.
2. If asked, provide the bank with copies of any correspondence you had when you tried to get your money back from the seller. This might include letters, emails or records of phone calls.
3. Some banks will ask you to fill out a claim form. Others just take details of the transaction and start the claim for you.

FREE template letter. If you’re told to put your request in writing we’ve put together a chargeback refund template letter to help you complain.

You typically have up to 120 days to get your claim in

The rules set by Visa, Mastercard and American Express only usually give you 120 days to get a claim in – and the clock usually starts ticking from the date of the payment, though it does depend on the type of situation. Here are some examples:

• Broken goods. You buy a bicycle and take it for a first spin two weeks later only to discover its brakes are faulty – and the retailer won’t help sort it. The deadline starts from the date you bought it.
• Failed delivery. A delivery date for your ordered goods isn’t met, the item never arrives and complaint calls to the firm go unanswered. The deadline starts with the date of the original missed delivery.
• Collapsed company. You book a flight or trip with a firm that then goes bust before you take it. The deadline starts from the date the flight was due to take off or the holiday to start.

To start a claim, call your bank card provider and ask to dispute the transaction. It can then start the procedure of claiming the money back from the supplier’s bank.

Some claims CAN be made after 120 days, but the longest cut-off period is 540 days from the date of the initial transaction.

How long does it take to get a refund?

Unfortunately, there’s no specific timeframe when it comes to getting your money back. Once you’ve applied for chargeback, it’s up to your card provider to contact the supplier’s bank to process the refund, which could take time.

It’s worth noting some bank staff may not know about this procedure, so you may need to explain it to them. There’s no upper limit to the payouts though Mastercard has a minimum spend of £10.

However, it should not be an open-ended request. If the whole process takes longer than eight weeks, take your case to the Financial Ombudsman. Even though the claim itself should be completed in eight weeks, it may take longer to receive the money in your account.

– Warning. Money refunded via chargeback can be ‘clawed back’

Chargeback can be a very effective way of getting a refund – yet it is important to understand that, in practice, you are disputing a payment.

And that means the firm which you are depriving of your payment has an opportunity to dispute what you’re doing and “clawback” the payment.

Here’s how it works:

• Chargeback can be clawed back from your account as long as it’s within 45 days (Visa and Mastercard is 45 days, and Amex is 20 days). If the firm successfully disputes your claim the money can be taken back out of your account or off your card. But after that, you can be pretty confident the money is yours to keep.
  
  
• This is most likely to happen in unclear situations. So if you’re doing a chargeback for non-receipt of goods from a firm that’s gone bust, you’re likely to be pretty safe.
  However, if your dispute is with a travel agent that has been arguing it can’t refund you money until it gets it from the airline, then it may ask for a clawback. That doesn’t mean you are wrong to do the chargeback, it’s more just to be aware that there may be a ‘fight’ over it.
• If your chargeback is clawed back, you can fight it. There are two main ways to dispute a chargeback clawback. The first is to go to your bank and make a formal complaint about the fact that the money has been taken. If this doesn’t work and your complaint fails, you have a right to go to the free Financial Ombudsman Service, which will adjudicate.
  Alternatively, a lesser-known method is to use American Express, Mastercard or Visa’s own dispute process and arbitration. If you do that though, remember that the Financial Ombudsman doesn’t cover those firms, so you won’t be able to appeal to it later.

What to do if your claim is rejected

If you’re unhappy with the time your bank is taking to process your claim or dissatisfied with the result, you can file a complaint directly with your card issuer, such as Visa. The issuer then has eight weeks to address your complaint.

If your claim is rejected altogether, ask for a ‘letter of deadlock’ from your provider. This is essentially a final response, which you can then take to the Financial Ombudsman to make a complaint. However, it’s worth first double checking whether you’re eligible to make a Section 75 claim.

Approaching the Financial Ombudsman is entirely free of charge and definitely worthwhile. The website offers an easy-to-use claim form and provides comprehensive information on how the Ombudsman can assist in the Financial Rights Guide.

If more than eight weeks have passed since you filed a claim with your provider, you do not need a letter of deadlock. In such cases, you can directly escalate the matter to the Financial Ombudsman.