Unsatisfactory Purchases: Credit Card Protections

In the United States, the Fair Credit Billing Act allows for consumer protection in the event of unsatisfactory purchases, and undelivered or misrepresented services/products. If you are unsatisfied with a purchase from a store, there are things you can do. If the merchant refuses to refund your money or replace the item, you may be able to take action against your credit card company. Your rights are established by law, but they depend on certain things, such as the purpose of your purchase (business or personal), how much the product cost, and how far from home you were when you made the purchase.

What are Your Credit Card Rights?

In some ways, it is actually safer to use your credit card than use cash. In fact, federal law protects many aspects of your credit card use. For example:

  • If you purchase a defective product with your credit card and the merchant refuses to replace it, you may have recourse.
  • If you discover mistakes on your periodic statement, the law provides a way for you to correct these.
  • If your card is lost or stolen, your liability for unauthorized charges is limited as long as you follow proper notification procedures.

Other aspects of credit card transactions and use are governed by law as well.

Can a merchant demand additional identification?

Most credit card companies require only that a merchant match your signature on the receipt with the signature on the back of your card and ensure that the card is not expired. When a clerk requires you to fill in your address or phone number or insists that you show your driver’s license, he or she may be breaking the law in some states. If this happens, you may wish to register a complaint.

Should you show your credit card when you write a check?

One of the most useful features of a credit card is that it lets you write checks for your purchases. However, in some states, the merchant does not have the right to write your credit card number on your check. Recording your credit card number does not protect the merchant in any way because the merchant cannot charge your credit card for the merchandise unless you sign a credit receipt. Also, if your check bounces, the merchant is prohibited from charging your credit card for the amount of the check or for the bounced check fee.

Factors Used to Determine Fault & Liability

First, there are some factors regarding your purchase that must be considered to determine if the credit card company is legally liable:

  1. Type of card that you used – You must have charged the item by using the charge card issued by the store where you bought it or by using a bank card, rebate card, or travel card. Even if two stores are owned by a parent company, one store will not give you a refund for purchases made at another store (Gap will not refund your money for a purchase made at Old Navy, for example).
  2. Price of merchandise – If the merchandise was bought with a card not issued by the seller, then the product must cost more than $50. If you paid $49.99, you’re out of luck, legally. Then the dispute is between you and the merchant, and the credit card issuer doesn’t have to spend time resolving the matter.
  3. Form and timing of complaint – You must complain in writing within 60 days after the first bill containing the error arrives. Some bank cards will intervene on your behalf even if you don’t write them until after the time limit, but they may charge you an additional fee for doing so.
  4. Location of transaction – The purchase must have occurred within your home state or within 100 miles of your billing address, unless the item was purchased with the seller’s charge card. If you travel more than 100 miles from your billing address to make a purchase, your bank card doesn’t legally have to become involved in your quest for a refund. However, many card issuers will waive this mileage rule. You just have to ask, politely. Orders placed on your credit card from online catalogues, internet sales, and phone orders may be considered in-state purchases since information is sent to your home or the merchandise was advertised locally. State laws may vary, but these purchases are generally protected. Overseas purchases are also frequently covered under consumer protection laws.

Circumstances Exonerating Credit Card Companies

There are some circumstances under which the card company is not legally responsible. Some of these include:

  1. Business purchases – The card issuer has no responsibility for the transaction if a purchase was made for business purposes.
  2. If you’ve already paid for your merchandise – it won’t help to contact your credit card company if the purchase has already been paid. If a product is defective or stops working after it is paid for, your dispute is with the store and not with your card issuer. Your best course of action in this case is to contact the store, the manufacturer, and/or the service center.
  3. You sign a blank receipt – If you sign a blank credit card receipt before services are rendered, and the service provider determines that additional costs are necessary above and beyond what was quoted, you are still liable. For example, if you take your car mechanic for instance and you sign a blank credit card authorization before final charges are tallied, then the mechanic determines that additional repairs are necessary above and beyond the initial estimate, you may still have to pay him. You have received a benefit for your payment, and you signed the authorization form.

Getting Help for an Unsatisfactory Purchase

As we said, you do have purchase protections under the law. If you feel you were ripped off by a merchant, under US Federal law, you must first try to settle the matter by going directly to the merchant. If the company is still in business, you will need to show that you’ve made a good faith effort to resolve the matter. Keep records of all correspondence with the merchant, including notes about phone conversations and copies of letters.


If you can’t resolve your problem with the merchant, write a letter to the credit card company. This letter should be sent within 60 days of the first appearing on your statement. The letter should include your name and account number, along with information about the unsatisfactory purchase (type of item, price, and the nature of dissatisfaction). You should also describe the steps that you’ve taken to resolve the matter with the merchant. The card issuer will then conduct an investigation into the matter, and you may withhold payment on the unsatisfactory merchandise until the matter is resolved. Until that time, no interest or late fees will be charged.

If the card issuer’s investigation concludes that you are right and the merchant is at is at fault, you will not have to pay for the item(s) or any fees and finance charges that may have accrued during the investigation period. However, if you’ve already made payments on the defective merchandise, you will not get the money back; card issuers can’t retrieve money that you’ve already paid.

If you receive an item that you discover to be defective, don’t pay the bill until you give the credit card issuer time to investigate. As stated above, any payments that you make will simply be money that you’ll never recover, even if the card issuer ultimately agrees with your version of events and that the merchant delivered unacceptable merchandise.

If the credit card company does not believe the merchant is at fault, you will be expected to pay for the item in full. If you don’t, you risk being sued, and the normal credit reporting process will resume. In other words, your credit rating could suffer. You risk having the credit card company turn your bill over for collection and you may lose your credit card altogether. All of this is generally assumed to be common sense, but you’d be surprised by how many consumers still refuse to pay for merchandise that the credit card issuer deems billable. In these cases, the consumer is simply retaliating against the merchant; however, this strategy always backfires and is dangerous to your credit standing. You may choose to continue your dispute with the merchant by going to small claims court. While the dispute continues, you should send a letter to the credit bureaus explaining the apparent delay in your payment status. Remember, consumers have a right to place any statement that they choose atop each of their credit reports (with all three agencies); if you apply for new credit, that statement will be visible to potential creditors when they pull your credit report. It doesn’t mean that they will overlook the negative entries, but they may take your statement into consideration.

Related Pages in Our Site: Using Credit Cards Properly | Pros and Cons of Credit Cards | Credit Card Basics