How (and when) to dispute a credit card charge

We've all been there — you open your credit card app or check out your account online to pay a bill or look over recent purchases, and you notice a charge that doesn't add up.

Either it's at a merchant you don't recognize, or it's for a purchase you've made but in the wrong amount. Or maybe the charge doesn't reflect a return you've made.

Many may wonder what options they have for fixing those errors if the merchant is unwilling or unable to make the necessary changes. There is an option in those cases with your credit card company: filing a dispute.

Let's go through the ideal process for recovering your money if something doesn't seem right on your credit card statement.

When can you dispute a credit card charge?

The Fair Credit Billing Act (FCBA) of 1975 protects consumers against creditors in certain situations regarding unauthorized charges and billing errors. Under the FCBA, you are entitled to be able to take action against a card issuer in these circumstances:

• Unauthorized charges
• Charges with an incorrect date or amount charged
• Charges for undelivered goods and services
• Math errors
• Failure to post payments or credits for returns
• Failure to send bills to your current address
• Charges for which you request clarification or written proof of purchase

This means you can't dispute a charge just because you are dissatisfied with a product or service or didn't agree with an authorized user making a certain purchase. Think of it this way: If you're not willing to file a police report on the person who made the purchase without your permission, you shouldn't try to dispute the purchase.

But let's say you order a product through an online seller, and that product arrives at your house shattered. If you cannot resolve the matter with the merchant, you could escalate to disputing the charge.

For TPG readers, this could also apply to certain extreme situations in getting refunds from airlines or other common carriers. If you cannot get a refund from an airline when your flight is canceled, or if you're trying to refund tickets from an airline that's gone bankrupt, disputing the charge is likely the best option to resolve the issue.

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Rule of thumb: Talk to the merchant first

Your first course of action should always be to contact the merchant in cases of billing error or order issues. Many times, this is the fastest way to resolve a problem. Most companies will work with you to try to fix the problem without getting the credit card issuer or payment network involved.

But if you are unable to receive a warranted refund or other acceptable resolution from the merchant, a credit card dispute should be your next step. It's in the banks' best interest to help you recover your money.

"Banks are making it a lot easier for customers to dispute charges; they want to keep their customers happy, and with the growth of dispute inquiries, an increasingly competitive landscape, and the ever-evolving demands of their cardholders, banks have no choice but to make the process as easy as possible for their customers," said Monica Eaton, CEO of Chargebacks911.

Now that we've covered when you can dispute a charge, let's go over how to actually do it.

Related: How a 10-minute call reversed $2,300 in fraudulent charges on my credit card

How to dispute a purchase

If you notice a fraudulent purchase or another disputable charge (that you've already tried to resolve directly with the merchant), it's time to reach out to your credit card issuer to dispute the charge through them.

If you suspect an unauthorized charge has been made to your account, you should call the customer service line on the back of your card to discuss the next steps with the issuer, including replacing your cards and resetting your online account information.

Step one: Gather the necessary evidence

Keep receipts, photos and any communication you've made with the merchant to try to resolve the issue. In many cases, your issuer will ask for evidence of the billing error and that you've made a good-faith effort to reach out to the merchant before they will step in.

Step two: Fill a charge dispute with your issuer

Most issuers offer an easy way to do this online, including Amex, Chase, Citi and Bank of America. Usually, there is a "Dispute This Charge" option when you expand a specific charge.

Remember that you can usually only dispute charges that have already been posted. Pending charges generally do not have a "Dispute" option available online or in the app.

If you can't find where to submit a dispute online, you can also call customer service and dispute a charge that way.

Step three: Follow up in writing

Remember that while the Fair Credit Billing Act offers consumers protections, those protections depend upon you following its guidelines. This means you'll need to send in a formal dispute letter by mail (yes, snail mail) within 60 days of the disputable charge.

The Federal Trade Commission lays out your specific rights and the guidelines you must follow to be protected. It also provides a sample letter you can use.

This step isn't required to dispute a charge with your credit card company if the issuer has other avenues to request a dispute. And most of the top credit card companies will work with you to resolve the issue. But it is worth noting that the only way you'll technically be covered in the eyes of the Fair Credit Billing Act is by sending in a written request.

Given that, if you're having trouble getting an issuer to cooperate with a dispute, make sure to send in a written request to ensure the issuer is held accountable to the fullest extent of the law.

Chargebacks: What happens when you dispute a purchase?

So you've disputed a purchase. What happens next?

Many issuers will issue you what's called a chargeback. Essentially, a chargeback is a reverse credit card purchase. A charge is sent back up the line from your account to your card issuer to the merchant bank and then back to the merchant, all through the payment network used (such as Visa or Mastercard).

This way, a charge is removed from the consumer's account and the issuer is able to "charge back" the cost to the merchant when deemed appropriate. Remember that you will lose any rewards you earned on that purchase.

Bottom line

The Fair Credit Billing Act does offer protection in cases where unauthorized or incorrect charges are made to your account, and most issuers are diligent about helping cardholders where possible.

You should only dispute charges in the appropriate circumstances outlined above. The dispute and chargeback process can help cardholders receive refunds and correct billing errors in cases where you cannot make it work with a merchant.

Related: Why small charges on your credit card could mean big problems