In a nutshell, a chargeback is the process followed by a credit card issuer that reverses a charge and credits the account holder that amount. This is ultimately a protection offered to credit card holders that is often seen as a benefit or perk to paying with a credit card versus cash.
Through the chargeback process, the merchant that originally sent the charge through refunds the money if a reason for the refund is substantiated. A few of the scenarios that might require the chargeback process to be put to work include disputes over the products received (or lack thereof), errors in the amount charged, and charges that are fraudulent or deceptive.
So how does the chargeback process work?
1. If a cardholder has reason to believe that a charge should be revered, they must call the credit card issuer and explain the situation or contact them online by logging into the account center and filling out the appropriate form.
2. Usually, the credit card issuer will advise you to call the merchant first to have them reverse the charges and try to resolve the issue through that means. Other times, they'll take immediate action on your behalf.
3. When the merchant refuses to take action or reverse the charges directly, the credit card company will begin their own investigation into the matter and try to determine whether the charges should be considered legit or not from the standpoint of the cardholder.
4. If the charges are deemed incorrect or fraudulent, the credit card company will post a temporary credit to your account and then request to have the merchant's card processing bank refund the charges as necessary.
5. At this point, the merchant's bank will usually review the matters themselves to make sure the reasons are legit.
6. If they determine that the merchant's charge is indeed incorrect or fraudulent, they'll go ahead and refund the charge and the matter will be considered complete and final.
There is quite a bit of back and forth throughout the procedures and the chargeback process can end up taking quite a bit of time. Practicing patience is really the only option. While it is only right that both parties to the transaction get a fair chance at trying to resolve the matter and having their say, it's also good to know that most credit card issuers will go to bat for their cardholders when such a situation does arise from time to time.
Recently, a friend of mine who, like many, is easily confused when it comes to financial matters, asked me to take a look at her monthly statement for a credit card she's been trying hard to pay off, but feels like she isn't getting anywhere.
I gladly took a look at her credit card statement and the very first thing I noticed, which almost floored me, is the interest rate she's paying...
29.99%!
That's right...
29.99%...
Wow!
I don't know where I've been (obviously not looking at credit card statements :-)), but I thought this was illegal.
Her credit card balance is $5,141.06.
If she doesn't charge anything else on this credit card, which she hasn't been, and if she continues to make the minimum required monthly payment, as she has been, based on the way her bank calculates her minimum required monthly payment...
It'll take her 339 months to pay off her current credit card balance of $5,141.06 and she'll pay a total of $12,345.65 in interest.
In other words...
If she continues doing what she's been doing...
It'll take her 28.25 years and cost her $17,486.71 to pay off her $5,141.06 credit card balance.
No wonder she feels like she isn't getting anywhere...
She really isn't!
So...
What should she do?
Well...
There are a number of things she could do.
However...
One of the simplest things she could do would be to continue making the same minimum required monthly payment she'll be making this month, every month from now on.
Why?
Simple...
Because she's already in the habit of making a monthly payment of at least this much on her credit card.
You see...
Most banks and credit card companies figure the minimum required monthly payment based on a percentage of the credit card balance due or a specific fixed dollar amount, whichever amount is higher.
Therefore...
Generally, the minimum required monthly payment goes down as the credit card balance owed goes down until the minimum required monthly payment gets down to the minimum required dollar amount.
In her case...
Her bank's minimum required monthly payment is 3.5% of her credit card balance or $10.00, whichever amount is higher.
This month her minimum required monthly payment is $184.93 of which $134.87 is interest, with only $50.06 applied to the balance.
If she were to do absolutely nothing else but make this $184.93 payment *every* month from now on...
She'd pay off this credit card in 49 months instead of 339 months and she'd pay $3,749.46 in interest instead of $12,345.65 in interest, saving $8,596.19 in interest charges!
Big difference, isn't it?
Now...
If she really wants to go for it...
She could increase the amount of her "new" self-imposed minimum required monthly payment.
For example...
If she were to start paying an additional $15.07 a month for a total of $200.00 a month...
She'd pay off this credit card in 42 months instead of 339 months and she'd pay $3,191.78 in interest instead of $12,345.65 in interest, saving $9,153.87 in interest charges.
If she were to start paying an additional $40.07 a month for a total of $225.00 a month...
She'd pay off this credit card in 35 months instead of 339 months and she'd pay $2,574.37 in interest instead of $12,345.65 in interest, saving $9,771.28 in interest charges.
If she were to start paying an additional $65.07 a month for a total of $250.00 a month...
She'd pay off this credit card in 30 months instead of 339 months and she'd pay $2,165.81 in interest instead of $12,345.65 in interest, saving $10,179.84 in interest charges.
If she were to start paying an additional $90.07 a month for a total of $275.00 a month...
She'd pay off this credit card in 26 months instead of 339 months and she'd pay $1,874.29 in interest instead of $12,345.65 in interest, saving $10,471.36 in interest charges.
If she were to start paying an additional $115.07 a month for a total of $300.00 a month...
She'd pay off this credit card in 23 months instead of 339 months and she'd pay $1,654.79 in interest instead of $12,345.65 in interest, saving $10,690.86 in interest charges.
And so on.
Now...
If she really, *really* wants to go for it...
She could double the amount of her "new" self-imposed minimum required monthly payment.
If she were to start paying $369.86 a month instead of $184.93 a month...
She'd pay off this credit card in 18 months instead of 339 months and she'd pay $1,254.35 in interest instead of $12,345.65 in interest, saving $11,091.30 in interest charges.
Huge difference, isn't it?
As I said above, there are a number of things she could do, but this is one of the simplest and it's something she can start doing right *now* to begin eliminating her credit card debt...
And...
So can you! :-)
If all you do is stop charging on your credit card and continue making the same minimum required monthly payment you'll be making on your credit card this month, every month from now on, you'll make significant progress towards totally eliminating your credit card debt once and for all.
Both Scott Stadler & Tony Mase are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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Tony Mase has sinced written about articles on various topics from Kids and Teens, self improvement and motivation and Finances. Tony Mase is a serious student of the works of Wallace D. Wattles and the publisher of "The Science of Abundant Life" ebook by Wallace D. Wattles...