If you use a credit or debit card to buy something and a dispute arises about the transaction, you can ask your bank to charge the transaction back to the merchant’s bank, which will then debit the merchant’s account. You have no automatic right to demand a chargeback, but it is industry practice to charge back disputed transactions if there is a valid reason. Merchants themselves sometimes complain to us about chargebacks.
Participants in card transactions
Every credit or debit card transaction involves:
- the cardholder
- the merchant
- the card issuer – the cardholder’s bank
- the card company – the business operating the payment network (for example, VISA and MasterCard)
- the merchant’s bank, which gives the merchant the means of accepting credit card payments.
When a cardholder makes a purchase, the cardholder’s bank pays the merchant’s bank and the merchant’s bank transfers the money to the merchant. The cardholder repays the bank.
The only direct relationships are between the cardholder and the cardholder’s bank, and the merchant and the merchant’s bank. These relationships are governed by the respective conditions of use. There is no direct relationship between the issuing bank and merchant bank, and no contract between cardholder and card company. The card issuer, merchant’s bank and card company are involved to the extent they provide technology to enable payments to be made between them.
Card-issuing banks and merchant banks link up with international card companies (usually VISA or MasterCard), which are the central link in facilitating transactions. These global networks enable the relationship between card-issuing banks and merchant banks.
A card company’s chargeback rules determine whether:
- the cardholder’s bank (that is, the cardholder) has to pay for the disputed transaction or
- the cardholder’s bank can charge the amount back to the merchant’s bank so the cardholder’s bank (that is, the cardholder) isn’t liable.
Grounds for attempting a chargeback vary according to card company rules. A cardholder has a specified time under the credit card’s conditions of use to dispute a transaction. Failing that, it is assumed the cardholder has accepted responsibility to pay.
A chargeback attempt may fail if there is not a valid reason for it, and card issuers are unable to force a merchant’s bank to refund credit card payments.
If a customer makes a chargeback request on the basis that he or she has not authorised the transaction, the customer's bank will charge the transaction back to the merchant’s bank. The merchant will be asked for proof of the transaction. If the merchant has information showing the cardholder authorised the transaction, and no other chargeback right exists, the transaction is processed back to the cardholder’s account.
If proof of purchase isn’t supplied within the required timeframe, the cardholder’s bank can charge the transaction back. If the merchant’s bank can’t then establish that the cardholder authorised the transaction, it has to accept the chargeback and debit the merchant.
Other situations in which card company rules may allow for a chargeback include:
- The cardholder paid for, but did not receive, goods or services (such as when a gift card has been bought from a store that then closed down before the card is used).
- The cardholder received defective or incorrectly described items (the cardholder must first attempt to resolve the dispute with the merchant or return the goods).
- The merchant entered the wrong amount for the transaction.
- The merchant duplicated the transaction.
- The cardholder cancelled a recurring payment set up on the card account, but the merchant continued to process payments.
Generally, banks and card companies have no role in disputes between cardholder and merchant about the supply or quality of goods or services.
Complaints from cardholders
We look at whether the:
- credit card company's rules about the deadline for disputing a transaction, and the consequence of failing to do so by then
- cardholder received appropriate and timely information and forms to dispute a transaction
- cardholder’s bank processed the chargeback request appropriately, including using the proper chargeback reason code for each disputed transaction, and completing chargeback documents and other requirements correctly
- cardholder’s bank correctly assessed the response of the merchant’s bank to the chargeback.
If we find a cardholder’s bank failed to carry out a transaction dispute process correctly, we may award compensation. However, we usually cannot uphold a complaint about an unsuccessful chargeback if we find the bank followed the chargeback process correctly.
The complaints we receive are mainly from customers disputing transactions because they believe they have been misled by the merchant about the service offered or they have discovered that the service was a scam. A bank generally can’t charge back these transactions because the customer authorised the transactions, and the merchant has provided the service. We recommend bank customers exercise caution before providing their credit card details online.
We occasionally get complaints about credit card payments to companies that provide services online, such as betting and binary options trading. The binary options companies are usually based overseas and provide a platform for customers to trade on whether stocks or currencies will rise or fall in value. Trading in binary options involves speculation and you either win or lose as a result of your trade. A bank may be able to chargeback a transaction in very limited circumstances, if a company refuses to allow a withdrawl of an available balance.
Complaints from merchants
A merchant may complain that its bank was wrong to allow a chargeback, arguing the bank had no right to take money out of its account, or disputing the reason for the chargeback request.
The relationship between the merchant and merchant’s bank is governed by a contract between them relating to the card-processing facility, which usually includes a merchant agreement and operating guide.
Merchant complaints often arise when the merchant has been the victim of fraud. A fraudster may have used a stolen card to buy the merchant’s goods or services – usually by phone or internet. Such transactions, being unauthorised, will be charged back to the merchant. Both merchant and cardholder are innocent victims, but the merchant is liable for such transactions under its contract with the bank.
Merchants can reduce their risk of unauthorised online transactions by using security measures such as Verified by VISA or SecureCode.
Chargeback attempts may fail if there isn’t a valid reason for it, and card issuers are unable to force a merchant’s bank to refund credit card payments.
Gambler received service he paid for
Morgan opened an account with online betting company XYZ Ltd and placed a $6,000 bet, which was accepted. He gave XYZ Ltd his credit card details to charge his credit card. A few days later he received a message from XYZ Ltd asking him to verify his identity. His account access was restricted until it could successfully do this.CASE 2
Handling of complaint left customer unable to challenge merchant
Ravi entered his credit card details on a movie streaming website to see whether he could receive the service. He was charged by the merchant for a service he says he never received. He contacted his bank to make a complaint about the credit card provider and the merchant. He wanted the charges from his card removed.CASE 3
Trader authorised disputed transactions
Tony had accounts with several online binary options trading companies. Tony traded on whether the value of stocks and currency would rise or fall. He made several deposits into his accounts, providing his credit card details so merchants could charge his card. Tony’s trades were unsuccessful and he lost most of his money.
Contactless cards are a quick and easy way to make payments without the need to swipe a card or enter a PIN. Users simply hold the card close to a contactless terminal. Purchases up to $80 can be made in this way. Transactions over this amount require a PIN. Banks are automatically issuing new or replacement cards with contactless technology.
They're convenient and easy to use. And they're great for people who struggle to see PIN keypads. They can also reduce the risk of fraud because you don't need to hand over your card.
There is a greater chance of transactions being made without your knowledge or consent. However, you won't be liable for any loss resulting from any unauthorised use of your card unless:
- you have acted fraudulently or negligently
- you have contributed to the unauthorised use of your card, such as by failing to take reasonable care of it, or by taking an unreasonable time to notify your bank about the loss of your card.
Taking care of your card is especially important if it contains contactless technology. Contact your bank immediately if it is lost or stolen, or if you notice unauthorised transactions on your statements. For more about protecting your card, see our Quick Guides Cards and PINs and Mobile banking.
These are highly unlikely. Your card needs to be very close to a payment terminal to work. This prevents unintended walk-by purchases.
These aren't possible. The technology permits you to pay for each transaction only once. Even if you present your card to a terminal several times, just one transaction will go through. Nor will accidentally presenting two contactless cards result in more than one purchase.
How we can help
We can consider complaints about such things as unauthorised transactions and fraudulent use of contactless cards, but we cannot look into a bank’s decision to issue a card with contactless technology, nor can we require a bank to issue a card without contactless technology. Talk to your bank about your options if don't want such a card.
Cards and PINs
The loss or theft of a credit or debit card can be worrying and inconvenient. But if someone also gets your PIN, you face an even greater risk of losing money. Banks typically cover any loss if you take reasonable care of your card and PIN and report any loss promptly. If you haven’t taken reasonable care, you are unlikely to recover the money. Protecting your cards and PINs is therefore vital, as is selecting a secure PIN and knowing what to do if you lose a card.
You need to take reasonable care of your cards, much as you do with wallets and keys. You don’t need to know the exact location of your cards at all times, but you should know their general whereabouts, such as at home, in your bag or in your pocket. You shouldn’t leave cards unattended in a wallet or purse, or anywhere a thief could remove them without being noticed.
It is not reasonable to leave your card:
- inside a car
- in a jacket pocket when the jacket is unattended in a public place, like a café
- in a hotel when you are out (unless it is in a hotel safe).
Remember to remove your card when using it at an ATM, shop, restaurant or any other outlet after making a purchase.
Losing a card
If you can’t find your card, tell your bank as soon as possible. Banks have dedicated phone lines to report lost or stolen cards. If you are overseas, keep a note of the phone number with your travel documents.
You can specify the accounts that are linked to a card. The fewer a thief or scammer can access, the lower any potential loss will be. Talk to your bank about which accounts should not have card access.
Follow these tips when making up a PIN:
- Avoid obvious number combinations or sequences (for example, 1234 or 0000).
- Avoid using birthdays, anniversaries, home addresses, parts of your phone number or other numbers easily connected with you.
- Avoid sequences that also form part of your card number.
- Use a different PIN for every card.
Protecting your PIN
Commit it to memory and never write it down. Don’t tell anyone your PIN – and that includes family members, police or bank staff. Note that banks will never ask for your PIN. Never reply to any email asking for your PIN (or asking you to update your PIN). It’s bound to be fraudulent.
Never store your PIN (even in disguised form) on any device, including mobile phones, computers, tablets or other electronic devices. If you have done so already, delete it and get a new PIN.
You should take reasonable care when entering your PIN at an ATM or an eftpos machine in a shop so as to stop someone from seeing it. If you think someone may know your PIN, contact your bank immediately and get a new one.
By default, money loaded on to New Zealand-issued cards is New Zealand dollars. It can then be converted to the foreign currency or currencies you need on your travels. Most cards let you have funds in several currencies at once. You can generally load money on to a travel card at a branch or online. Processing loads done via internet banking may take two or more days.
If you bought your travel card from your bank but it was issued by another institution, you might not be able to transfer foreign currencies directly from your bank accounts to the card. It might need to be converted to New Zealand dollars first, as will any foreign currency in cash you want to load on to your card.
When you load foreign currency, the exchange rate will be determined at the time the funds are actually loaded on to your card. The rate may also depend on whether you load the foreign currency at a branch or online.
When overseas, use your travel card as you would a debit or credit card at home. If you have enough local currency loaded, you can pay for purchases in that currency without incurring more currency conversion charges. Note that if you withdraw cash from an overseas ATM using your travel card, some providers charge for this.
Fees and charges
Most travel cards have a set-up fee, which you pay when you get the card. There may also be fees for other things, including:
- loading money on to a card
- withdrawing money from the card at an ATM or over the counter
- an inactivity fee if you don't use your card for a specified period of time.
If you don't have enough local currency on your card for a purchase, you can use another currency to make the purchase. Currency conversion charges will apply. They will depend on whether you:
- use one of the other currencies on your card
- spend in a currency not offered by your travel card provider.
Read your card’s terms and conditions to understand all the applicable fees and charges.
Complaints we can consider
This will depend on whether your travel card was issued by a member of our scheme. Some banks issue their own travel cards. Others offer customers travel cards issued by other financial service providers.
If a bank issued your card, we can consider complaints about the accuracy of advice and card information. We can also consider complaints about problems using the card, subject to the limits of the powers we have.
If bought your card from your bank, but it was but issued by another financial service provider, our role is more limited. We can consider complaints only about the accuracy of information and advice given by your bank, but not problems using the card.
For all other complaints, you will need to contact the card issuer or distributor’s dispute resolution scheme. These details should be in the card's terms and conditions. We can refer you to the right place to make a complaint.
Getting the best out of your card
Here are some tips about using a travel card, based on complaints we have investigated:
- Try to load enough local currency of each country you plan to visit to cover your costs there.
- Have another means of accessing funds while travelling.
- Balance the convenience and safety benefits of using a travel card to withdraw cash against any costs you will incur because some travel cards offer free ATM withdrawals.
- Be aware that if you book with hotels, rental car companies and places offering cruises, they will often "pre-authorise" an amount to your card to check its validity and ensure you have enough money to pay for at least part of the transaction. You won’t be able to use those funds for other purchases until the pre-authorisation is lifted, so you may want to consider taking a credit card for pre-authorisations
- Read the card’s terms and conditions before you buy. This is where you'll find details about authorisation holds, for example.
You should also protect your travel card and its PIN as you would any other bank card. See our Quick Guide Cards and PINs.