Credit card chargebacks

Can you reverse a credit card transaction? The answer is yes. Not always - but probably far more often than many people realise.

So you've bought that rare set of Jimi Hendrix CDs over the net and paid for them with your credit card. Your account has been debited, but the website you ordered them from has vanished and your emails are bouncing back. Of course, no CDs have arrived.

Don't panic. You should be able to get your money back through a "chargeback". In this report, we explain how they work.

Your questions answered

What is a "chargeback"?

A chargeback is where the money paid to the retailer is reversed out of their account and refunded to yours. You are also refunded any interest charged.

Banks usually give you two months from the date of the transaction to apply for a chargeback.

How do I get one?

The first step in any dispute you have with a supplier is to give them the opportunity to put it right - a good retailer should do it straight away. If they don't, apply to your bank for a chargeback.

You will need to provide the bank with various details, including proof that you've returned the goods - for example, a receipt from a courier. In the case of a service, you will need to supply a copy of your letter to the retailer stating that the service was not received and requesting a refund.

You'll also need to provide the date and amount of purchase, and a description of the goods or services ordered.

Will a chargeback cost me anything?

Most banks will charge a fee between $5 and $8 - but only if your chargeback application is unsuccessful.

When would my bank grant me a chargeback?

Your bank should refund you if your account was fraudulently or mistakenly debited.

Beyond this, banks apply a set of rules laid down by credit card companies. It's usually up to the investigating bank officer to decide if your claim is covered by one of these rules.

I bought a Panasonic television, but was delivered a Sanyo. The company will not refund my money. Would I qualify for a chargeback?

Yes - there is a "not as described" rule. When goods are not as described, and the supplier refuses to cooperate, take the goods back. Then contact your bank and apply for a chargeback.

I paid a deposit for a lounge suite, but the business went bankrupt before it was delivered. Can I get a chargeback?

It may depend on the bank. The BNZ told us yes, under the "non-receipt of merchandise" rule. But ASB Bank said no, there was no chargeback reason for this!

What if the shop's account doesn't contain enough money to cover the chargeback?

If the other conditions are met, you should get your chargeback. The bank should refund you, and stand in line itself as an unsecured creditor of the trader.

I bought a study course that came with an unconditional 30-day money-back guarantee. I sent the goods back within 30 days but never received the refund. Is a chargeback available?

Yes - there is a "non-receipt of credit" rule. Apply to your bank, which will give the supplier 30 days to refund you under the guarantee. If it doesn't, your bank should give you a chargeback. Unfortunately, you will have to cover the cost of return postage.

I bought a computer from a store the other day, but have now found a better deal elsewhere. Can I reverse the purchase?

No. You cannot get a chargeback simply because you have changed your mind or found a better offer somewhere else.

What if the bank refuses to give me a chargeback?

If your bank refuses to refund you and you are unhappy with the reasons given, complain to the bank. If you are unhappy with the outcome, take your complaint to the Banking Ombudsman. If your complaint is upheld, the Ombudsman can order your bank to give you a refund.

More help

• Office of the Banking Ombudsman - www.bankombudsman.org.nz. Phone 0800 805 950
• Read our article on Credit cards.