Credit Cards

What To Do When Your Credit Card is Charged in Error

Consider yourself lucky if you’re a longtime credit card user who’s never checked your account and found a transaction that looks fishy. While a suspicious card transaction will often be picked up first by card issuers, who then contact the cardholder to verify its legitimacy, an erroneous charge can also slip through, due either to fraud or an error by the merchant or cardholder.

Here’s a step-by-step guide to what to do when you find a puzzling, even alarming, entry arrives on your card account.

Verify that it’s really an error

Sure, something looks wrong about the account entry, but take some time to confirm that it’s truly an error. It’s all too easy to misidentify a charge, especially if it’s posted under a cryptic name that bears little resemblance to the merchant’s actual name. And check with any others who share the account with you, to spare you the time and embarrassment of disputing a charge, perhaps while venting over fraud or merchant incompetence, only to discover that your spouse or child simply bought something they didn’t tell you about.

Contact the card issuer, especially if you suspect fraud

If the charge looks so suspect--it was made at a location unknown to you, say, or in an amount you’d never spend--contact your credit card issuer immediately, to dispute what appears to be a fraudulent credit card purchase. Legally, you cannot be held liable for more than $50 in fraudulent transactions, and even a charge of that amount is unlikely. Today, major banks offer a 'no liability' feature on most of their credit cards. They waive the $50 charge, as long as you report the fraud promptly--as in within two billing cycles.

Once you dispute a fraudulent purchase, the bank will issue a new credit card and number in your name, to prevent the continued and unauthorized use of your old card number. It’s typical to be told the new card will arrive within a week or so. If such a wait will be an inconvenience to you, ask about expedited delivery within a few days; customer service reps often have discretion to offer such an option, and to waive any extra charge for it if you request that.

The Federal Deposit Insurance Corporation (FDIC) recommends you also file a police report. This is not required, but it can help the police and other government bodies track these crimes, and locate and thwart their perpetrators.

Otherwise, try the merchant first

If fraud isn’t suspected, because you perhaps recognize the merchant but not the transaction or amount in question, contact the merchant.

This is a step the card issuer may well request you do if you instead contact their reps first. And it also makes sense in several other ways. The merchant may rapidly realize it made the charge in error, and reverse the charges more rapidly than if you pursued a formal dispute.

You may also generate a little goodwill from the merchant by doing so, and perhaps even a perk such as free shipping on a future order. By resolving the error with the merchant, rather than through the bank, you’ve spared the seller a “chargeback fee,” the $20-or-so charge that card issuers levy when a disputed transaction is found to be the merchant’s fault. And even if you don’t resolve the matter successfully, your outreach demonstrates that you’ve made a good-faith effort to resolve the matter, which can help you in the (unlikely) event the dispute eventually escalates to the level of legal action.

Anticipate a wait—and perhaps a lower credit-card limit as you do so

Many, if not most, errant charges are concluded rapidly. However, under the law the card issuer has up to 30 days in which to respond to you—in writing. In turn, they’re also required to resolve the dispute within two billing cycles.(Keep in mind, though, that you will not have paid the charge throughout this period.)

During the course of the investigation, your creditor may lower your credit limit proportionally to the amount being disputed. For example, if you are challenging a $500 credit card purchase and your credit limit is $2,000, the creditor may lower your credit limit to $1,500 while that purchase is under investigation.

Robert Harrow

Robert is the head of the Credit Card vertical at ValuePenguin and has been covering the card industry since 2014. His work has been featured in Reuters, Marketwatch, the New York Times and more.