credit cards

How to dispute a credit card purchase

Don't you just hate it when you buy a product and bring it home, only to discover the product is damaged or poorly made?

To make matters worse, the merchant refuses to replace it or give you a refund.

If you made the purchase with one of your credit cards, your card company may be able to help.

Purchase protection -- with catches

Credit card purchases are protected under the Fair Credit Billing Act. This law gives the consumer the right to withhold payment on poor-quality or damaged merchandise purchased with a credit card.

Under the law, you do need to make a real effort to resolve the dispute with the merchant before you can ask your issuer to stop a credit card payment. There are a few other catches as well.

The sale must be for more than $50 and have taken place in your home state or within 100 miles of your home address. Few issuers enforce the $50 or 100-mile rule on purchases, but all are free to do so.

So there's a chance that you'll be able to dispute credit card charges on shoddy merchandise purchased outside your home state, over the Internet, by mail order or phone order.

"Many credit card companies will let you dispute that," says Jeanne M. Hogarth, senior analyst of consumer policies at the Federal Reserve Board. "Technically, they don't have to."

Customers presumed right

Because card companies are eager to hang on to their customers, especially good ones, they'll often go above and beyond what's required of them by law when a customer is unhappy with a card purchase.

For example, Capital One issues a temporary credit to a customer's account when a purchase is in dispute. "If a customer sends a dispute letter, we'll issue a temporary credit so they won't have to pay for it," says Diana Don Colby, the director of financial education for Capital One. "We're giving the benefit of the doubt to the customer."

Capital One then contacts the merchant. If Capital One agrees with the customer, the refund stands. If Capital One sides with the merchant, the customer must pay for the item, plus finance charges.

Some card companies may be less generous when a big-ticket item is in dispute or if you made the purchase while traveling overseas. It all depends on the card company and how much they value you as a customer. They can point to the limits spelled out in the Fair Credit Billing Act whenever they want to.

"This is goodwill and that's all it is," Hogarth says. "At any time a credit card company can fall back on what's required by law."

Make the law work for you

To get the Fair Credit Billing Act to work for you, here's what you need to do:

First off, try to resolve the problem with the merchant. "Give them the chance to fix it. Sometimes they do," says Cary L. Flitter, a consumer attorney in Narberth, Pa.

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