The Credit Card Chargeback Scheme – What You Need to Know

You may have heard about the credit card chargeback scheme. It can be a useful way to get your money back if a credit card transaction goes wrong – but you’re not guaranteed a refund.

Credit Card Chargeback SchemeOne of the things we love about online shopping is being able to browse and buy from a vast virtual high street of niche products.

From old fashioned sweets and hand-made bicycles to spinning wheels and vinyl records – whatever your interest, you’ll find the goods online.

Just as handy, online shopping makes everyday life a lot simpler.

Forgotten to do the weekly shop or want to get your digital photos developed? Or maybe you need to replace your toaster? No problem – you can order them all these things online and have them delivered next day.

But with the growing popularity of online shopping, the number of traders has grown fast – and not all of them can be trusted.

That’s why you not only need to be very careful when shopping online, but if things do go wrong it pays to be aware of the credit card chargeback scheme – and its limitations.

Cover for purchases under £100

When you buy goods on a credit card, legislation known as ‘Section 75’ means that your card issuer has to protect any purchases you make – as long as they are worth between £100 and £30,000.

That’s because the card issuer is equally liable if something goes wrong – like the retailer going bust, orders not being delivered or faulty goods being supplied. It applies to good bought overseas as well as those purchased in the UK.

Unfortunately, however, the credit card company is not liable if the goods you order are worth under £100.

And that’s where the credit card chargeback scheme comes in.

What is credit card chargeback?

Unlike Section 75, the credit card chargeback scheme is not a legal requirement imposed on card issuers.

Instead it is part of the scheme rules that apply to debit and credit cards belonging to networks such as Visa, Maestro and American Express.

The credit card chargeback scheme is similar to Section 75 in that it’s designed to give you a degree of cover if the goods you order don’t arrive, are damaged, don’t arrive as described or if the supplier has gone out of business.

However, while it does have the advantage of applying to purchases under £100, your card issuer is not jointly liable in the same way as it is under Section 75.

This means you cannot guarantee to get your money back when things go wrong.

How does credit card chargeback work?

Let’s assume that you order some tools worth about £80 from an online retailer.

After five weeks of chasing, the tools don’t arrive and the supplier isn’t returning your calls or answering your emails.

You decide to claim your money back using the credit card chargeback scheme (you need to do this within 120 days of becoming aware of the problem).

When you call your bank, it will request a refund from the seller’s bank. If the seller has money in their account to cover your refund, you should be in luck.

However, if the money is not there, you stand little chance of getting it back – there are no guarantees because you alone are liable under the credit card chargeback scheme. Your own card issuer is under no obligation to give you a refund.

Some other pitfalls

Firstly, some bank staff aren’t as familiar with the credit card chargeback scheme as they are with Section 75, and may tell you that you don’t qualify for any refund if your purchase is under £100. If this happens to you, don’t take ‘no’ for an answer and ask to speak to a senior colleague.

Secondly, the scheme covers the transfer of money from your card – so be careful how you use online payment accounts like Paypal.

If you pay for goods using a Paypal (or similar) credit balance, then you won’t be covered under the credit card chargeback scheme. However, if you have an empty Paypal account, it is possible for your card issuer to match the transaction with your card – so you may qualify for protection under these circumstances.

Lastly, it can be very difficult to get action from a credit card issuer’s chargeback team. A Moneyhighstreet colleague was recently told he’d have to wait two weeks for a call back!

Be safe online

On the face of it, the credit card chargeback scheme can be a useful way of getting your money back – especially for purchases under £100.

But be aware that you are not guaranteed a refund because you are solely liable for the purchase – your card issuer is only jointly liable under Section 75 if you spend between £100 and £30,000.

So if you are buying online, always choose a trusted merchant and ask yourself what you would do if the transaction went wrong – could you afford to spend months chasing a refund, or even losing your money altogether?

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