Key takeaways
Disputes are raised when you believe a charge, withdrawal, or transaction on your account is incorrect, unauthorized, or fraudulent, prompting your bank to investigate.
Once a dispute is submitted, banks typically provide provisional credit while reviewing evidence, with resolution timelines governed by consumer protection laws.
Reporting errors or suspicious transactions as soon as possible helps protect your funds, strengthens your claim, and ensures you meet dispute filing deadlines.
What does a dispute mean in banking?
A banking dispute is specifically a disagreement between a cardholder and a merchant. You may have also heard disputes referred to as chargebacks.
The bank dispute system exists to protect cardholders from fraudulent situations. Thus, if something doesn’t seem right, the cardholder can contact their bank and reject certain charges. However, the bank has a right to investigate all cardholder claims. It is up to your bank to determine whether fraudulent activity has occurred.
In some cases, your bank will be able to explain the reason for a confusing charge on your statement. In such cases, you won’t receive a refund. However, if the bank investigates and determines the charge is fraudulent, they will likely initiate a chargeback. Subsequently, your funds will likely be returned to your account.
Is a dispute different from a refund?
Disputes differ from refunds because the returned funds come from your bank, not the merchant. In the aftermath, merchants typically owe chargeback fees to the bank.
Refunds are much quicker and easier to issue and process than chargebacks. Thus, cardholders should attempt to resolve the issue with the merchant before involving a bank. In fact, many banks require it before they are willing to escalate a dispute to their fraud department.
Reasons to file a bank dispute
There are several reasons why a cardholder might file a dispute with their bank,¹ including:
- A failure to deliver goods or services.
- Dissatisfaction with the quality of goods or services.
- Unauthorized charges.
- Failure to honor a cancellation request.
- General billing errors.
Some of these problems, such as billing errors or shipping delays, can be solved by contacting the merchant directly. Others, such as unauthorized charges, can only be solved by your bank.
What happens during & after a dispute?
Here are the steps involved in filing a banking dispute.
- Either the cardholder or the bank’s fraud department identifies a potential dispute. This could be as simple as finding an unusual charge on a bank statement while scrolling on your phone.
- If the cardholder identifies the dispute, they should contact their bank. They will most likely be connected to the bank’s fraud department. In some cases, the bank may reach out to you about a suspected fraudulent charge. From there, the bank will notify the merchant that a dispute has been filed.
- In some cases, the merchant may simply accept the dispute and pay the disputed amount at this stage. You will receive a refund.
- If the merchant denies the dispute, the bank will review the situation. The fraud department will likely research to find out if your dispute is justified. They may ask you for documentation or more information before they can proceed. Be prepared to garnish invoices, receipts, and any communication with the merchant to help the bank make a decision.
- The bank will determine if the charge in dispute is valid or invalid. They will notify the cardholder and merchant of their decision.
- If the dispute is determined to be valid, the cardholder will typically receive a refund.
In some cases, the cardholder or merchant may disagree with the bank’s decision. In those cases, they may choose to escalate the dispute. This can extend the research and review stages of the process. The bank has 90 days to present the results of its research.³
Will disputing a charge get me my money back?
If the bank reviews your disputed charge and determines it is invalid, you may get your money back. This is almost always in the form of a refund directly to the affected checking account.
Some banks may issue a temporary credit while your dispute is under review. The funds will become permanent if the bank settles the dispute in your favor.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
Sources
- https://www.usa.gov/bank-credit-complaints
- https://www.occ.treas.gov/topics/consumers-and-communities/consumer-protection/truth-in-lending/index-truth-in-lending.html
- https://www.helpwithmybank.gov/help-topics/credit-cards/disputes-unauthorized-charges/disputes/dispute-how-long.html
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†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.