What's the point of a chargeback when they just ask the merchant whether they owe money to the buyer?

Question

In my case, a big-name tax chain gave me incorrect information which would have cost me thousands of dollars. I had pre-paid, as is their policy, but did not file my return with them due to their bad information. I went to another, more reputable tax business, found that I was right, and received my full tax refund.

After this, I filed a charge-back against the tax chain. The tax chain told my credit card company that they didn't owe me money, and the credit card company closed the case.

So, what's the point of a charge-back, if they simply take the word of the merchant?

Answer 1

When you initiate a chargeback, the merchant has the right to dispute the chargeback. If they can provide proof that the purchase actually took place, the chargeback will fail.

We don't know all the details of your situation, of course, but it appears from what you have said that the tax chain probably has documents that you signed agreeing to the charges. They prepared your return (even if they did a poor job), and so from their perspective, they have decided that they deserve to be paid. Whether or not they did a good job is a matter of opinion, of course; their position might be that they did it correctly, and the second business did it poorly.

The chargeback is a powerful tool, but it is not a magic button that makes a charge disappear. If the merchant can show that a sale did indeed take place and show that the proper amount was charged, the chargeback will fail. For a service, it isn't enough usually to simply state that you were unsatisfied; if you received the service at the agreed-upon price, the charge is valid.

A chargeback is sort of a nuclear option when it comes to getting a refund. There are negative ramifications and expenses every time a merchant gets a chargeback (even if they ultimately win), and so often they will be willing to work something out to avoid a chargeback. You should go to the merchant first, if you can, and ask for a refund before considering the chargeback option. If you file a chargeback without even giving them the opportunity to work it out with you, the merchant will usually want to fight back.

Answer 2

So, what's the point of a charge-back, if they simply take the word of the merchant?

tl;dr: They don't.

As both a merchant and a consumer I have been on both ends of credit card chargebacks, and have received what I consider to be mostly fair outcomes in all cases. Here are some examples:

1. A nightclub overcharged me by exactly $100 for a bar tab. I contacted the club but they were short with me and unhelpful. I disputed it with the CC, provided the receipt and was immediately refunded the $100 overage.
2. I once hired a photographer for 2 photo shoots and had made two payments prior to the first shoot. After some back and forth about scheduling issues with the first shoot date, and a lack of responsiveness to my emails and phone calls, I canceled and requested a refund. The photographer refused to refund anything so I disputed with the CC. Since no services were performed yet, I expected a full refund for both payments but the CC decided to only refund the larger of the two payments I made. I should point out that I did sign a contract saying the down payment was not refundable, so even though I didn't like the outcome, I understand their reasoning.
3. As a merchant, one of my customers initiated a chargeback for a $5 purchase with their credit card without contacting us first. This really bothered me since we provide a 100% satisfaction guarantee, with a no-questions-asked refund policy. They were one email or call away from getting a refund but instead they went through their CC. I of course allowed the $5 charge to be refunded, but I received a chargeback fee of $20.

Takeaways from this:

• I strongly urge all consumers who are considering doing a chargeback to try to work with the merchant first, and use the CC dispute as a last resort.

• In general, you can think of the credit card dispute department like a judge. They hear the arguments presented by both sides, and consider them to the best of their ability. They don't always get it right, but they make their best attempt given the limited information they are provided.

Answer 3

The point of a chargeback is to force merchants to do the paperwork.

Many merchants don't, and are easy targets for chargebacks, even when they have, in fact, provided the good or service.

You used a tax prep service. They may have given you poor (technical) advice, but such firms are usually very good about doing the paperwork. That's why you lost.

Answer 4

You may be using the wrong method to get your money back. As others have said, this is not a valid use for chargeback; that is when a fraudulent charge occurred, or when a merchant charges you incorrectly.

However, many cards have various kinds of guarantees, one of which might cover this situation. Particularly in some european countries, such as the United Kingdom which has Section 75 allowing you a recourse, services are included with goods. Goods are typically the only covered elements in the US, though, but check your credit card agreement to be sure.

Second, you can go through the FTC. They will provide you a sample form letter to request a refund of your money, and if the merchant is not cooperative might choose to help you directly (especially if many others are in your situation).