VISA Chargebacks Explained

The so called Section 75 rules which were legislated back in the seventies to compel credit companies to take responsibility in the event that purchases transacted with their credit cards failed to go through for one reason or the other did not fully cover some transactions done with some other cards such as Visa.


To bridge this gap in legislation and provide fall back plan for clients who gets shafted in card transactions, Visa (and Mastercard) came up with some in-house rules to make up for failed transactions done with their cards. The whole system of compensation is known as Chargeback.
Visa chargeback operates on the idea that every charge on the visa card automatically binds the card provider to meeting their end of the bargain as far as valid transactions made on their cards are concerned. Chargeback is not, strictly speaking, a legal requirement to which Visa must adhere to but is a rather a voluntary measure undertaken to safeguard business integrity and clients fund.

When is Visa Chargeback Used?

It is important to note that the chargeback system is designed to get back money which have been charged to a Visa card with subsequent unsuccessful delivery or defective goods from the supplier’s bank and not the supplier itself. The system also caters for instances when a suppliers goes into receivership but payment is not guaranteed. Once a transaction for which payment has been charged to a Visa card has failed to take place, the client bank is called upon to get their client’s money back and promptly refund their customer.

Instances in which chargeback procedures can be effected include:

-When a supplier is suddenly declared bankrupt while a transaction had been made but no delivery made
-When defective goods are delivered to the buyer
-When the buyer fails to make a delivery for paid goods
-When a purchase is overtaken by an authorization deadline
-When fraud is detected and a purchase is linked to un authorized card transaction
-When a customer is billed several times for the same item or an incorrect amount is billed for a purchase

The Mechanics of Chargeback

A complaint must be lodged by the customer with his respective bank within a period not exceeding 120 days (180 days for international transactions) from date of the realization of the anomaly in a Visa transaction. The customer’s bank then sets into motion the process of claiming the money from the supplier’s bank. Contacting the supplier might help speed up the process. There is no upper limit for payouts in Visa chargeback.

However, one might not be successful in striking for a claim under the Visa chargeback. One has the option in this instance of seeking the aid of Financial Ombudsman. The services of Financial Ombudsman are offered free of charge and is a better alternative to letting one’s money get lost.

As noted earlier, Visa chargeback scheme is not a legally enforceable compensation scheme for transactions which goes wrong. Since it is a purely in-house arrangement which the Visa has put in place to strengthen its operational framework on the integrity and customer care fronts, it behooves each Visa user to take appropriate steps to ensure that all the transactions that they are willing to engage in are above board and are done with reliable trading partners.

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