How your credit card can save you from bad consumer experiences

Defective merchandise. Shoddy plumbing work. A car repair shop that didn’t fix the problem. Undisclosed and unfair fees. Shipments that never arrived. Even the most careful consumers sometimes run into problems. But using a credit card can help protect you when your customer experience goes awry.

That’s because many credit cards provide strong protections against lousy-service scenarios and companies that sell faulty goods.

The genesis of these protections is the federal Fair Credit Billing Act, which protects you from fraud by requiring credit card companies — not consumers — to deal with fraudulent charges. The law also provides important protections against billing errors.

What many consumers don’t know is that the law also requires credit card companies to give their customers the opportunity to dispute charges — and withhold payments — for goods and services that weren’t delivered as promised. This means that if you used a credit card to pay for something that isn’t satisfactory, and you tried to work it out with a seller who won’t budge, you can tell your credit card company you want to contest the payment and not have to pay for the transaction. Ditto for defective or undelivered products.

When you request a “charge-back,” the seller can protest. It may claim you made no effort to resolve the matter, refused to return goods that you say are unsatisfactory, or that the goods are exactly what you ordered.

In Checkbook’s experience — which includes feedback from surveys of consumers and staff who have requested chargebacks — credit card companies are far more likely to side with consumers than businesses during these disputes. For disputed transactions related to lousy service or defective merchandise, we find credit card companies often remove charges quickly, with few or no questions asked.

Because credit card issuers want to keep their customers happy, the protections they 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 to contest it, 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 sooner.

While debit card purchases aren’t covered under the Fair Credit Billing Act, when you pay with one that processes your payment through the Visa or MasterCard payment system, that purchase is governed by Visa’s and MasterCard’s consumer-friendly rules.

When paying with a debit card, if you’re asked to choose “debit” or “credit” at checkout, picking “credit” pushes the transaction through the Visa or MasterCard system. But choosing “credit” doesn’t turn your debit card into a credit card; the money to pay for the transaction still comes right out of your bank account and won’t be returned unless the bank rules in your favor.

Before disputing a charge, give the offending company a reasonable chance to make things right. Charge-backs are serious problems for businesses that get hit with them: They lose the disputed amounts plus pay fees of $50 to $150, depending on the credit card company. If they get too many charge-backs, they can lose their right to accept credit cards.

If you can’t work out the problem, ask your credit card company for its charge-back procedures. Often, you can contest charges on its website by simply going to your list of purchases, selecting the transaction, and using a link to report a problem. Some banks still require customers to submit requests in writing and mail in documentation (this is most common with debit cards).

Even if you already paid your credit card bill in full, you can still contest the charge. During the time that the credit card company investigates, the questionable charge is removed from your outstanding balance, and you are not required to pay it or the portion of your balance, or any interest, until the dispute is resolved.

Although Checkbook finds that credit card companies typically side with consumers, sometimes they do deny charge-back claims, even when sellers clearly were in the wrong. Sometimes this is due to customers having signed contracts that include causes such as “buyer beware” or “all sales final.” But if your request for a charge-back is denied, don’t give up. In Checkbook’s experience, a second or third appeal can result in a revised ruling in the consumer’s favor.

Don’t take advantage. Just as credit card companies keep a lookout for companies that abuse their customers, they also keep track of cardholders who dispute too many charges.

Also keep in mind that a successful charge-back decision from your credit card company doesn’t mean the seller has no rights against you. The seller can still try to get payment by suing you directly.

Delaware Valley Consumers’ Checkbook magazine and Checkbook.org is a nonprofit organization with a mission to help consumers get the best service and lowest prices. It is supported by consumers and takes no money from the service providers evaluated. Inquirer readers can access all of Checkbook’s ratings and advice free until May 5 via Checkbook.org/Inquirer/Credit-Cards.