Could my credit card company dump me for too many disputed charges?

October 14, 2015 7:03 PM

I'm really happy with my Capital One credit card that I've had for about 9 years now. Over the past few years, I've discovered that I also really, really like how easy it is to file a dispute over charges for things, like defective items that merchants won't refund or monthly subscription fees that went through despite having being cancelled. However, I feel like maybe I use this feature more than most people. Could I lose my beloved card if Capital One things I'm too big of a PITA?

This might sound like I'm a shill for the card, but probably any card company would give me the same warm fuzzies based on how I use my card. I use it to pay for basically everything, pay it off in full every month, and use the rewards that rack up to pay for travel. I would be bummed if they closed my account because it's the oldest card I have and does a lot of good things for my credit score. I also have a really big limit on it, again, it's good for my credit score. The dispute process is really easy: I flag a transaction, Capital One immediately refunds it, does an investigation (which has only once been decided for the merchant), and follows up with me online and via the mail to let me know they've taken care of the charge.

Sometimes, I'll get lazy and dispute things that I didn't go to the trouble of trying to resolve with the merchant. (Just so I'm clear, this is for legitimate disputed charges, like double charges that I don't feel like calling a restaurant about because I hate talking to people on the phone. I've also used it for items that were broken in shipping or never showed up. I'm not trying to cheat the system.) I probably have about one or two disputed charges a month. Does anyone know if this would be something the card company could dump me as a customer for, or do they not care because it's part of a merchant agreement?

posted by the thorn bushes have roses to Work & Money (15 answers total)

IANA whoever is in charge of this, but I'd be more worried about the unpaid debt from the merchant going into collections (see more here), and since you're skipping the documentation and working-with-the-merchant part it seems you could easily be shown liable. One or two disputes a month seems astronomical to me; in twenty years of owning six or seven cards I have only disputed two things. Be careful nothing you are doing could be construed as credit card fraud.
posted by Miko at 7:44 PM on October 14, 2015 [7 favorites]

Best answer: I haven't heard of someone having their card cancelled for this (it did come up on reddit), but it's not inconceivable. One to two disputed charges a month sounds awfully excessive to me. It's hard for me to imagine how you have so many transactions that go so badly that you require a third-party intermediary to sort them out. I eat out a lot and order many things online, but rarely have a problem requiring a refund, let alone one where I need the bank involved.

As a general rule, credit card companies are looking for patterns of behavior that are far outside normal as indications of potential fraud. Having something like 18 chargebacks a month is not typical.

As a sidenote, it costs merchants a considerable amount of money to deal with every dispute (up to a $100 fee to the bank, not counting their staff time). Forcing them to pay that because you can't be bothered to try to resolve the problem with the merchant first is not really fair. If a merchant gets too many chargebacks, it will lose its ability to process credit cards. While that's not directly your problem, the definition of "too many" is based on normal use, and normally people try to return broken merchandise before filing a chargeback.
posted by zachlipton at 7:50 PM on October 14, 2015 [31 favorites]

(yes, I meant 18 chargebacks a year, not a month)
posted by zachlipton at 8:00 PM on October 14, 2015

I'm a HUGE proponent of the chargeback, and I've only charged back 3 or 4 things in my whole life.

OTOH... Merchants sometimes double charge you on purpose (small biz, restaurants, etc..) so... I mean....

You use this feature too much if you haven't contacted the merchant first.
posted by jbenben at 8:07 PM on October 14, 2015

Nthing that you're doing an enormous amount of chargebacks. In twenty years of having credit cards I think I've done maybe 3 or 4 and they were for transactions where my details must've been compromised, I had nothing to do with incurring them.

I feel like losing the card could be the least of your worries if this triggered any fraud warnings at the bank.
posted by kitten magic at 8:08 PM on October 14, 2015

Mod note: Looks like the general "you shouldn't do this" topic is well-covered - please stick to the specific question now, thanks.
posted by restless_nomad (staff) at 8:35 PM on October 14, 2015

Yes, from personal experience, they may dump you for this and less.
posted by joan_holloway at 8:52 PM on October 14, 2015

Speaking with limited authority here, as I was an intern at a financial institution that issues credit cards... The merchants are almost completely at the mercy of the merchant's agreement, but they do weasel around it. For example, I've seen lots of business that accept [name of this card] but impose a $5.00 minimum to pay with the card. I know we had a stipulation that the merchant had to accept ALL charge amounts, even for $0.01, even when it totally screws the merchant. Under $5.00, most transactions are too expensive for the merchant, so the cost of the card company's service fees begins to eat their revenue. Obviously merchant's don't want that... but they legally have to agree to it and if you press them they will let you charge $0.01. You'd have to read the Capital One merchant's agreement carefully to be sure, but I would guess that this is a similar situation, where the merchant has to enter into some kind of arbitrage agreement in order to work with the card. Little provisions like this are why some businesses don't accept certain credit cards.
posted by deathpanels at 8:53 PM on October 14, 2015

Yes, I know someone whose credit card was cancelled because of too many automatic refunds/chargebacks. They happened to be mentally ill and over-spending was part of their disorder, but it did result in them trying to do chargebacks and the card eventually canceled their account and card.

I have no idea if there is a threshold for chargebacks, but 1-2 a month sounds very high to me. You're getting double billed at restaurants and online merchants, the recipient of broken merchandise, or you've ordered things that never show --- all totaling a few times a month? Or are these merchants just refusing to deal with returns according to their policies? I make probably a few hundred transactions a month for various cards and with various types of purchases and this has maybe happened to me.... 2-3 times in the last two decades.

Without any evidence of this, I suspect this kind of thing will get harder once the new chip-and-signature cards are more fully implemented.

In other words - if this card is important to you, I'd eliminate these charge-backs immediately. They're almost always easily solved through the normal channels.
posted by barnone at 9:04 PM on October 14, 2015 [5 favorites]

I also have a friend whose card was cancelled over excessive chargebacks, although I'm not sure what her level was at when this happened -- just remember her complaining about it. But agreed that 1 or more per month sounds excessive.

Honestly, before even the step of calling up merchants to see what happened (which, I would also do!), I would take a hard look at who you are doing business with and see if you can eliminate those companies that are making these errors/causing the problems. Is it consistently the same places that are charging you twice? Are you ordering off of totally random/sketchy websites? Because in addition to using chargebacks rarely, I ALSO very rarely have an issue where I need to contact a merchant about a double charge or defective items. Definitely not more than one time per month! I would maybe start with switching your business to websites with clear and easy returns processes that don't require a phone call (such as Amazon, etc.) and for local restaurants and other local businesses that double charge, either don't go back or start using cash. I bet this could make your number of chargebacks go down significantly even if you want to keep using the process in this way (which, yes, you definitely should not do -- this is shitty behavior).
posted by rainbowbrite at 6:11 AM on October 15, 2015 [3 favorites]

I hope this isn't off-topic, but I'm also surprised about all the double-billing. I've only been truly double-billed once. The restaurant swiped my card twice, two charges showed up. However, when I'm checking my account online, it frequently (I'd say at least once a month) shows double charges that are PENDING. I don't know what these pending double charges mean or why they show up, but they eventually just disappear. Sometimes it takes weeks, or even a month. I wonder if that's part of the problem here?
posted by gueneverey at 6:19 AM on October 15, 2015 [3 favorites]

Best answer: Congratulations on having reached the nine year mark on your card, the length you've had that credit card is (as you know) doing a lot of positive good for your credit score. It'd be a shame to lose that. As others have suggested, the level of chargebacks you indicate that you are initiating is alarming, and is definitely outside the normal pattern.

The chargeback process is intended to be used when you are unable to resolve an issue with a merchant directly. While the Capital One website probably makes it extremely easy for you to initiate a chargeback, it is not easy for a merchant. The merchant typically gets dinged with a chargeback fee regardless of the outcome of the dispute, and that fee is significant. A merchant can choose to respond to a chargeback and fight it, but risks another fee if the dispute is resolved in the cardholder's favor. The financial institutions make a lot of money when you initiate a chargeback, so they've made it easy to do, in hopes of generating fees. I believe that your casual use of the mechanism is something that they actively encourage these days. That doesn't mean it is a good thing, or that it is without some risk.

There are absolutely cases where a chargeback is warranted, and I strongly encourage you to use the system in the way that it was originally intended. This may mean that you have to work with merchants a little more to resolve issues. Most of them know that they really don't want to incur a chargeback, so usually they'll try hard to resolve.

In response to deathpanels above, incidentally, Dodd-Frank changed things, and by law a merchant may impose a minimum amount for credit cards, regardless of what a merchant account agreement says.
posted by jgreco at 6:21 AM on October 15, 2015 [5 favorites]

Response by poster: Jgreco, that's really helpful information! I'd love for more information, if anyone has it, for the number of chargebacks that might trigger my credit card company dumping me as a customer.

I regret saying that I do 1-2 month, if anyone has any future answers, I'm asking kindly for you to reserve your judgement because I've gotten the message that it's too many. Speculating about my spending habits was not what I was looking for here! I was throwing a number out there based on the past month, when I did two chargebacks (one was laziness for not pursuing it with a restaurant that charged my twice, but I'll knock that off). I checked and I've done 3 or 4 chargebacks this year, and I think twice last year.
posted by the thorn bushes have roses at 11:14 AM on October 15, 2015

I checked and I've done 3 or 4 chargebacks this year, and I think twice last year.

With this more realistic piece of data it is probably safe to say you are below whatever threshold there may be for closing credit card accounts for excessive charge-backs.
posted by John Borrowman at 2:22 PM on October 15, 2015 [1 favorite]

I have no inside knowledge, but I suspect it largely depends on what the merchants are doing in response to your chargebacks. If they are just concurring and refunding the money that is a different scenario than if they are responding with demands to be paid. The credit card company will see you as a good customer given your long history and high use. I'd expect you could count on them to take the path of least-resistance/greatest profit. That's likely to do the chargebacks until a merchant complains and then bother to look more closely at your specific patterns.
posted by meinvt at 2:25 PM on October 15, 2015