how come credit card bills can be refunded, i.e if you get scammed the credit card company can reverse the transaction but a bank transaction cannot be reversed?
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You can reverse transactions on a debit card but it takes longer.
With a credit card you’re effectively loaning money from a bank to pay for stuff. So when you file a charge back to your credit company they can just add the balance back into your account and deal with it on their end.
With a bank transfer it’s *your actual money* so you can’t actually see the number go back up until the money has been moved back into your account.
Credit cards are more protected because it’s their money. They care a lot more about it than whatever is going in your own personal bank accounts.
Two different systems.
A bank transaction, I e a bank transfer is usually done through a system called SWIFT. Per SWIFTs protocols you aren’t actually reversing the transaction, rather you are recalling the transfer which was made. Bank transfers are usually initiated by the customer through their own bank, so the risk and onus is on the customer to be vigilant.
A card transaction is processed through a network like Mastercard, Visa, AMEX. Transactions here are executed through a Point of Sales machine which is operated by a merchant who has access to these networks When you are “disputing” a transaction which you claim is fraudulent, your bank will request the network to investigate as to how the merchant was able to submit the transaction. If the investigation finds that the transaction was initiated without the customers consent, the charge back is successful. Some banks/networks even take it a step further and offer payment protection.
The only exemptions to these rules are transactions made with card PINs or 3Daecure passwords.
A debit card has the same protections too.
Hope that helps
With a debit card, you’re paying cash via your banks card. That means that any money that goes out has physically gone out.
With a credit card, the company is paying, and then you’re paying them back for purchases you made. You promised to pay them back for purchases *you* authorized. If you didn’t make those purchases, then you’re not liable to pay them.
Don’t know about debit cards but I work disputes at a major credit card. They will only investigate if it’s over 500$ they just write it off. Sorry granny we aren’t going to catch the guy that stole your card and bought some shit online.
The customers always want justice, but yeah no we aren’t going to send a guy to check the cameras at a gas station.
Lots of people have explained but not exactly the reason that bank account transactions are not as reversible.
Lets start with a baseline assumption. The bank is NOT the one who is left holding the bag at the end of all this. What I mean by that is this. If you have a credit card issued by chase, and you request a chargeback and they do so. That money did not come out of Chase’s pocket.
Every time you buy something by credit card, the opposite side of that transaction is a merchant. That merchant has a company that they work with known as a payments processor and the contract between the payments processor and the merchant is known as a merchant agreement.
Charge backs are AWLAYS payed for by the merchant. If you spot a fraudulent charge you report it to your bank/credit card company. There are investigations but if you get that money back it’s because it came out of the pocket of the merchant. It’s NEVER the bank that pays for that transaction refund.
And that’s key. The merchant agreement allows them to do this. Even if I (the merchant) took the deposit from that sale and immediately moved it to another bank account, the merchant agreement would just take the chargeback out of tomorrow’s sales deposit, since there’s transactions going between the merchant and the payment processor every day, the processor can always deduct a chargeback from my next deposit.
It’s the same deal if you pay for something with a debit card. BUT, if you do some kind of bank to bank transfer (as scammers often get you to do) it’s another story entirelly.
If you transfer money, it just goes into another bank account. There’s no payment processor involved, no merchant agreement and more importantly no string of future transactions to squeeze the money out of.
If the bank is able to reverse the transaction, they will do so. But if the bank account that the money got deposited into has been emptied, then no one is able to reverse that.
And this is the real key. Since the banks are NEVER the ones who are left holding the bag, they say that there’s nothing they can do. Chargebacks don’t come out of the bank’s pocket, nothing comes out of the bank’s pocket. If the bank can get the money back, they will but with a credit card they are able to take the money out of future deposits, it’s not the case with a fraudulent transfer. The bank never approves a chargeback if there’s no pocket that they can reach in and take the money out of. They never reach into their own pocket.
Bank transfers can be refunded within a certain period of time.
Credit card companies settle about once a month, which is why it is easy for them to offer that “30 day protection”. Basically they pay their bills and they get their receivables sorted once a month. During this time a fradulent transaction is as easy to stop as you just telling them and them marking it on their books as “don’t pay” or “don’t bill” and they can then figure it out. Credit companies are easily able to do this because they got accounts in many banks or they are a bank themselves. At the end of the day they are just marking money from one book to another and at the end of the banking period (a day, a week, a month, 3 months… whatever…), the books are settled and everyone gets paid what they are supposed to and billed what they must be paid. This is why credit card bill for something that you paid today can come next month, for them it is a non-issue to sort as long as at the end of the banking period all the accounts are settled.
Now why is this harder for basic traditional bank payments? Because banks settle about every 3 days. Put the payment is marked instantly between them. So if you need to cancel a payment, you need to do it right away – and this is what banks advice you to do: contact the bank immidiately so they can just the transfer before the next patch is processed. This can be from 4 hours to 3 days.
When you pay 9,95€ via bank transfer to someone, your bank doesn’t actually pay this instantly. It just marks down on to a ledger that “We need to pay 9,95€ to Bank B” and tell bank B that they are going to pay them 9,95€; meanwhile bank B has a 19,95€ payment it need to do to bank A so they do the same. After the banking day is over both banks settle their books between each other, and money are transferred.
Now you might get the wrong idea about how this works. They don’t actually do small payments like that between each other. They do hundreds of thousands to millions in one go. Which is why they do them every few days. They wait for the payments to accumulate enough to make the work required to handle and verify the payments worthwhile. Small banks might hold on for longer or pay in smaller blacks. With an unified system of communication banks can settle these and make the payments easily. Whatever means is used to do this payment between them, is irrelevant to the customer. They might trade cash, financial instruments, loans, bonds, or sometimes even physical cash or even gold. Most of the cash in the world is actually wrapped in plastic and in cardboard boxes, being carried around from one bank to another. This is to ensure that banks have the correct cash reserves legally required that they need to function.
Basically banks mark their payments and receivables and tally them between each other in real time. However they settle their payments between each other whenever it suits them best. But for your practical purposes the bank payment is instant.
In European banking system, they settle the books 4 times a day. What this means is that 4 times a day, they calculate how much is each bank needs to pay each other. So a payment you made at 6am, get calculated at 9am and show up at the receivers account somewhere around 10am. This is the case for my paycheck, I know my boss makes the payments a around 10pm day before (because I see the time stamp on the tax slip), that means they go to settling at 6-7am on the first patch, and it comes to my account before lunch so at 9-10am.
When you chargeback on credit card, the merchant where the card was used gets debited by the bank plus there is a small fine added. Its the merchant’s sole responsibility to prove that “you” made the transaction to avoid this. For merchants, this is risk of doing business when accepting credit cards.
OP’s question is not quite correct. You can get a chargeback from a bank (debit) card.
I am European and use Wise (formerly TransferWise), and I recently fell for a phishing attack (rookie error I know) and the perpetrator tried to make a bank transfer. When that failed twice, because the 2FA on my phone asked me to confirm the transfer, which I did not do, the hacker was able to create a virtual bank card (debit card) and use that to spend my money.
This was fortunate for me, because by making a fraudulent payment (i.e. not authorized by the account holder – me) with a virtual card, I was able to initiate a chargeback because the payment was made through the MasterCard network.
Usually these chargebacks can take up to 90 days to be resolved – in my case it took 2 weeks, and I received all my money back.
As long as you can clearly show that you did not authorize the payment, you should be OK. In my case, the hacker changed some of my details, so they left a crumb trail.
The flip side is that Wise closed my account and I had to open another one with them, which was a pain, but the correct thing to do IMHO.
(I should also say that I did work at Wise for almost a year, so I know a little more about how the whole system works a little better than the average Joe, so while it was a total shock to see my money gone, I knew exactly what I had to do)
Sally offers to sell you her bike for £100.
In the first scenario, your mum buys Sally’s bike and pays her for it. Your mum gives you the bike right away, and you promise to pay her back later. Then you notice that the bike is broken and you refuse to pay your Mum for it. Your mum is now £100 out of pocket so she goes round to Sally’s house and demands that Sally’s parents hand over the money from Sally’s moneybox: they see how serious your Mum is and do just that.
In the second scenario, you had your mum £100 and ask her to drop it off at Sally’s house. When you notice the bike is broken, you tell your mum who goes to speak to Sally’s parents. Your mum hasn’t got any money invested in this, and when Sally’s parents are reluctant to raid Sally’s moneybox they all decide that it’s better that you and Sally sort it out between yourselves.
In the real world, credit card payments, debit card payments, and bank transfers *can* all be reversed. However, because the bank is on the hook for credit card payments they are *far* more motivated to recover funds when there is a dispute.
There are other factors that affect this too, such as the agreements that merchants sign up to when they start accepting credit card payments that make it easier to recover money from them. But mainly it’s down the the bank’s motivation not to be the one who is left out of pocket.
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