Last Updated Jul 1, 2011 8:00 AM EDT
When considering disputing a merchant's charges, keep in mind that it's in a credit-card company's interest to fix most problems fast. According to Consumer Reports, It costs at least $25 to process a disputed charge but it can cost more than $200 to replace you. So it's cheaper simply to credit you for small amounts without an investigation" For larger disputes, credit-card issuers also probably weigh whether you'll take the matter to court or cut up your card.
When you send the dispute letter, DO NOT send it to the same address where you send your credit card payments. Instead, send the letter to the address for "billing inquiries" which is typically listed on the back of the credit card statement. In your letter, include your name, address, account number and a clear description of the error.
Include COPIES of documents that support your claim. Be sure to keep the originals for your own records; and also keep a copy of your dispute letter and everything you send with it.
Send the letter by certified mail, return receipt requested. The letter must reach the credit card issuer within 60 days after you receive the billing statement that includes the charges you are disputing.
Review this sample dispute letter and an explanation of the dispute process on the FTC web site.
Once you've completed these steps, the burden lies with the credit card issuer. The company must acknowledge your complaint IN WRITING within 30 days of receiving your dispute letter. Then, the card issuer is bound to resolve the dispute within two billing cycles.
All of this sounds fairly straightforward. While you are working through the process, which can potentially last up to five or six billing cycles, you will continue to receive bills which claim that you not only owe the disputed amount, but you also owe a growing finance charge on the disputed amount.
Disputing a charge on your credit card should not affect your credit rating. First, it is within your rights to withhold payment on the disputed charge AND the finance charges during the investigation. But regular billing rules apply to all other charges and finance charges. The credit card issuer is not allowed to try and collect this money, your account cannot be closed or restricted, and the issuer cannot report you as delinquent to a credit bureau or reporting agency.
Assuming that the card issuer agrees with your dispute and finds that your bill is indeed incorrect, expect to receive a letter detailing the error and what corrections will be made to your account. The creditor must remove all finance charges, late fees or other charges related to the error.
If it turns out that your bill was correct, you will receive a letter explaining what you owe and why. You may write back saying that you refuse to pay the amount, however, the creditor can now begin the collection process and can also report a late payment to a credit bureau.
You should know the law only requires a "reasonable" investigation into the dispute, not an exhaustive one. For example, the creditor will probably not go so far as to check the store security camera footage when tracking down a disputed charge.