The problem with credit card disputes

The problem with credit card disputes

Credit card disputes are out of control! For those who don't know, when you dispute a charge on your credit card statement, you automatically get your money back and the burden of proof rests entirely on the merchant to prove the charge was valid and get its money back. The process takes 90+ days and is mediated by the customer's bank. Yes, the customer's bank, the one who authorized the charge in the first place, who has nothing to gain from disagreeing with its customer, who charges the merchant dispute fees regardless of the outcome, gets the final say on the matter.

My company has only won one credit card dispute since 2014. I'm not sure why I even bother submitting evidence at this point. Actually, many companies have stopped wasting time defending themselves and chalk it up to a cost of doing business.

Many times, charges are disputed as fraudulent because a person loses his/her credit card, which is then used without the cardholder's authorization. Someone steals your credit card and uses it to buy lunch at Burger King. You see the charge on your statement and realize your card must have been stolen because you're a McDonald's man. No way you went to Burger King. No problem. Call the bank, tell them of the issue, and you'll have your money back that day.

You know who foots the bill? Burger King. And not just the cost of lunch, but dispute fees for the time the bank has to spend "investigating" the dispute. You lost your wallet, the hungry thief stole it and used it illegally, and your bank authorized the fraudulent charge, yet Burger King is held responsible. Obviously.

This is why we've all stopped carrying cash around and aren't overly concerned if we lose our wallets. Lose your phone? Panic attack. Lose your wallet? Eh, I'm sure it will turn up.

Worse than fraud, customers knowingly dispute valid charges to get their money back. Sometimes a dispute doesn't start out malicious, but once you have your money back, it's difficult to own up to your mistake and ask the bank to drop the dispute. I mean, if the bank weighs the evidence and sides with you, why should you feel bad about it? The merchant had a chance to defend itself. But, because it's in the bank's best interest to side with its customer, you will win, regardless of the facts.

We had a customer dispute a charge because the item she received was cardboard and she was expecting wood. The product description clearly states (three times) that the product is made of cardboard, but she admittedly (in an email we submitted as evidence) didn't read the description before placing her order. Regardless, we gave her the opportunity to return the item for a full refund. Instead, she chose to dispute the charge on her credit card, thereby getting her money back and keeping the item that arrived in good condition and as described.

Others have disputed entire orders, when the issue was only related to one or two items.

Whatever the reason, I think the dispute process goes something like this:

CUSTOMER: I didn't receive the products I ordered!!! I want to dispute the charge on my card.

BANK: Ok, let's get 'em!


BANK: Hey, the merchant submitted tracking numbers that verify you did receive what you paid for, including proof of delivery signatures. They also submitted email correspondence in which you confirm you got a refund for the items that didn't arrive.

CUSTOMER: I don't care.

BANK: Ok, you can have your money back. Oh yeah, and Mr. Merchant, you owe us additional fees for all the hard work we put into resolving this dispute.

CUSTOMER: Thank you! This is the best bank ever. I don't have to pay for things I buy. I'm definitely telling my friends about you!

BANK: We hope you do! That's why we'll always side with you and not those evil merchants. Give us a call the next time you have buyer's remorse or just want to take your anger out on a merchant -- that's what we're here for.

Ah, the joys of no-risk purchasing.

I can't complain too much though -- I've also benefited from the banks' ridiculous dispute policies. The decreasing anxiety over using credit cards is driving more e-commerce transactions, especially to smaller businesses like mine. In addition, as an online business, the cost of disputes is similar to a physical store's inventory loss as a result of theft.

Perhaps I'm just jealous of the credit card companies' brilliant business model. What other business has its customers jumping at the opportunity to raise prices on everything they buy? Want 2% cash back? You got it. How about points that you can redeem for a free vacation? Worried about fraudulent charges? Don't be. Our card has purchase protection. Be sure to use your card for every purchase, no matter how big or small, so that you're protected and, soon, you'll be swimming in rewards!

Sound too good to be true? Yeah, because it is. As credit cards have replaced cash as the ubiquitous form of payment, merchants have had no choice but to accept cards for payment, and, as a result, pay the associated transaction and monthly fees. As the rewards and perks on your card increase, so do merchant fees. And, guess what? So do the prices of all those goods and services you buy with your card.

But I digress. Go forth and spend (risk-)freely! You may as well enjoy the perks you're paying for.

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