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How to get a refund for a fraudulent credit card transaction

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Do you see a transaction on your credit card statement that you don’t recognize? If so, you shouldn’t overlook this. It could well be a fraudulent transaction, or one you did not authorize.

If you investigate and find that indeed the transaction stems from fraud, you have certain protections and can put in for a refund of the fraudulent charge with your card issuer.

Confirm that the transaction is fraudulent

Before you decide a credit card transaction is fraudulent, though, make sure you are right. It seems consumers are prone to mistake a legitimate transaction for a fraudulent one.

For instance, it could be that an authorized user on your account is responsible for the transaction. Check with them to make sure they did not initiate it. Another possibility is that you don’t recognize a legitimate transaction because you can’t recall doing business with the named merchant. That could be a false alarm, too, since some merchants bill under a different identity from the one they conduct business with.

Also note that you shouldn’t report fraud just because you don’t want to deal with a merchant. There is a process for addressing situations such as:

  • Not receiving a good or service you paid for
  • Being billed for a recurring service that you canceled
  • Not getting credit for a product or service you are not satisfied with
  • Being charged twice for the same item
  • Getting charged a higher amount than is on your receipt

Such incidents don’t qualify as fraud and it would be in your best interest to try to sort out the issue with the merchant first before reporting it as such. Negotiating with the merchant tends to be a faster process in these cases than initiating a dispute with your card issuer.

Dispute process to get refund

Once you determine you are indeed dealing with a fraudulent transaction, you should inform your card issuer immediately. Your issuer will likely lock your card and issue you a new card with a new number. Considering the major card networks Mastercard and Visa have zero liability policies, you will not be liable for any legitimate fraudulent charges.

Visa requires issuers to credit you for unauthorized charges within five days after you notify them. However, the credit is provisional, and they could also reverse the credit if they determine after investigation that you were guilty of “gross negligence” or fraud, or that you delayed reporting your loss. Credit could also be withheld, delayed or limited based on your account standing and history, and the findings of the investigation.

The Fair Credit Billing Act also offers protections for so-called billing errors, which include unauthorized charges. Under federal law, your liability for fraudulent use of your card is capped at $50.

To take recourse to FCBA protection, send in a dispute letter to the issuer’s stated address for billing inquiries, with a statement of your issue. You should send this within 60 days of when the first statement with the fraudulent charge was mailed to you. As a precaution, send it by certified mail and ask for a return receipt so that you have proof of receipt. The issuer should settle the matter within 90 days of getting your letter.

FBI tips to prevent card fraud

The Federal Bureau of Investigation offers some tips to help consumers avoid credit card fraud. These include:

  • Don’t give out your credit card number online unless you recognize a site to be secure.
  • Make sure merchants you are dealing with are reputable.
  • Research merchants to make sure they’re legitimate, using resources such as the Better Business Bureau (and online customer reviews).
  • Just because a business has a flashy website doesn’t mean it’s legitimate.
  • Watch out for unsolicited emails such as those offering investment opportunities (for instance, the notorious ‘foreign prince’ scams), which are likely phishing attempts.
  • Be cautious in undertaking transactions with overseas individuals and businesses.

The bottom line

If you suspect you did not authorize a credit card transaction, confirm it is indeed fraudulent and then immediately inform your card issuer. Thanks to zero fraud liability policies, you will likely get credited the amount involved shortly. However, the credit could be withdrawn after investigation by the issuer. And thanks to the Fair Credit Billing Act, you are not liable for more than $50 in unauthorized charges.

Contact me at pthangavelu@redventures.com with your credit card-related questions.

Written by
Poonkulali Thangavelu
Senior Reporter
Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues.
Edited by
Managing Editor