Using these wisely gives you best protection
As too many of us know, credit cards can get you into trouble if you’re not careful. But the flip side is they can prevent or get you out of hassles with service providers and merchants. Using a credit card to pay for goods or services automatically affords strong protections against instances of lousy service and companies that sell faulty goods.
The genesis of these protections is the federal Fair Credit Billing Act, a law that protects you from fraud by requiring credit card companies — not consumers — to deal with fraudulent charges. In other words, the credit card company goes to bat for you. The law also provides important protections against billing errors.
What many people don’t know is that the law also requires your credit card company to allow you to dispute charges and withhold payment for goods and services that you didn’t accept or that weren’t delivered as promised. This means that if you use a credit card to pay for a service that doesn’t measure up, and you try to work it out with a seller who won’t budge, you can tell the company that issued your credit card that you want to contest the payment and get your money back. Ditto for defective or undelivered products.
When you request a “chargeback,” the seller can protest it. They might claim that you made no effort to resolve the matter, refused to return the goods that you say are unsatisfactory, or that the goods are exactly what you ordered. But as a practical matter, sellers rarely succeed in reversing chargebacks. As long as you return the merchandise (or try to return it), or document the product or service defect (for example, by having a second auto repair shop correct a lousy repair and write up what they did), you have a good chance of winning the dispute and getting your money back. Sometimes credit card companies will simply eat disputed charges to keep their customers happy, rather than opening an investigation.
In an informal poll of Checkbook members, more than 100 had used the chargeback protection, and almost all of them were successful. Billing mistakes and cases of theft and fraud, in particular, were handled promptly — no surprise, because laws clearly protect credit card users from these types of problems. For disputed transactions related to lousy service or defective merchandise, credit card companies usually removed the charges quickly, with few or no questions asked. Sometimes credit card companies investigated, which took a month or two and some backand-forth, but customers almost always won.
Sellers more often win disputes when they ask customers to sign contracts during the purchase process that include clauses such as “all sales final.”
And the protections that most credit card companies provide are in practice even broader than your rights under the law. For example, while the law states that you have to contest a charge within 60 days of receiving a bill, most banks that work with Visa and MasterCard give their customers 120 days, and on a case-by-case basis usually allow even more time, especially if you can document that you could not have known about the problem any sooner. And though the law protects you only for purchases in your home state or within 100 miles of your current billing address, credit card companies usually let you contest any charge. American Express, in particular, is well- known by retailers to have a very generous policy toward its card users.
Debit card purchases aren’t covered under the Fair Credit Billing Act. But when you pay with a debit card that uses the Visa or MasterCard payment system, that purchase is governed by Visa and MasterCard’s consumer-friendly rules. Most debit card purchases are routed through Visa or MasterCard; if you’re asked to choose “debit” or “credit” at checkout, choosing “credit” pushes the transaction through the Visa or MasterCard system.