Should I stop payments on my credit card after a chargeback dispute?

Question

I paid $2,000 to a merchant last year. The merchant failed to reasonably deliver on their contract. I asked the merchant for a full refund, no go. I filed a chargeback against Citibank. It was denied - they cited it had been more than 6 months since the payment, although service from the merchant hadn't yet been completed. (Aside - don't use Citibank!) I took the merchant and Citibank to small claims court, both named as defendants. Neither showed up to defend. My claim got dismissed against Citibank but upheld against the merchant, who was ordered to repay $2,000 plus my costs.

The merchant has filed an appeal, still pending. On the billed card, I still owe Citibank about $10,000. I see little prospect of ever getting the money out of the merchant, even if I win the appeal. What are the pros and cons of stopping payments on my credit card? I've been through this kind of situation before (although it was in England, I'm now in Kentucky). Before when I stopped payments on the card, the bank pressured the merchant to eventually make a refund but holding out like that did serious damage to my credit. Can I expect a similar outcome in Kentucky? Or will interest on my card simply mount and it be likely I'll just end up having to pay that as well? Do I have any better options?

Answer 1

You have no legal basis to stop payment to the Credit Card Company, as even the court already clarified.

I understand that for you the money you pay the credit card company is the same money you expect to not get back from the vendor, but legally it's not related. It would be the same as if you stopped paying rent - the landlord would have little understanding for your loss with some vendor somewhere, and not accept such a pay-stop.

It might be hard to accept, but what you don't get back from that vendor is lost - you can try to sue his pants off, but if there's nothing left you won't get anything. Actions against the credit card company just get you in deeper doo-doo (and financial losses).

Answer 2

I'm going to simplify your situation and restate it for clarity:

I owe Citibank $10,000. A company owes me $2,000. If I tell Citibank I will not pay them the $10,000 until after I receive the $2,000 owed to me, will Citibank help me retrieve the $2,000?

I believe when stated this way the answer is unfortunately, but clearly: No, it won't help at all. (And it will hurt you.) The fact that the $2,000 owed to you was originally paid via a Citibank credit card is no longer relevant.

My suggestion is to pay your bills (on time), and keep after the company that the court ordered to pay you.

Answer 3

You are asking if you should knowingly commit fraud by failing to pay your credit card provider given that you are unhappy with the outcome of your court case against them.

Aside from everything ethically wrong with your plan of action, note that as the 'little guy' here, this will not go well for you - This will be marked as a serious negative on your credit report and will result in your credit card provider doing everything they can to get the money back.

Answer 4

I appreciate your frustration. It may help to know that Citibank would have paid the fraudster who failed to fulfill his part of the contract. They are merely an intermediary offering financial services. Why should they get stuck with the bill? Hope that makes it easier to pay what you owe to Citibank.