Understanding Your Rights Under the Fair Credit Billing Act: A Practical Guide to Protecting Your Credit Card

If someone charged your credit card incorrectly or you’ve been overcharged on a recent purchase, there’s actually a powerful federal law working in your favor. The fair credit billing act, passed way back in 1974, was designed specifically to protect consumers like you from billing mistakes and fraudulent charges. What many people don’t realize is that this law does far more than just let you dispute a wrong charge—it gives you the right to temporarily withhold payment on disputed amounts without damaging your credit score, and it forces your bank to investigate and fix errors if they exist.

“Mistakes happen,” says Matt Buckalew, an attorney with Looney and Conrad in Houston. The problem is that most consumers don’t take full advantage of these protections. “You really need to go over your billing statements very carefully,” he emphasizes. The stakes are real: before this law existed in 1974, consumers who withheld payment for inaccurate charges could face serious credit damage. Today, that’s no longer the case—but only if you know how to use these rights correctly.

The Foundation: What the Fair Credit Billing Act Actually Protects

The fair credit billing act covers more situations than you might think. It protects you if you’re billed by mistake, such as when a math error appears on your statement or you’re charged twice for the same purchase. It also applies when you don’t receive an item you paid for, when a merchant sends you the wrong product, or when a business fails to provide the service it promised. However—and this is crucial—the law does NOT protect you if you’re simply unhappy with the quality of what you bought or received. “That’s challenging the quality of the service, not the validity of the charge,” explains John Ulzheimer, president of consumer education at CreditSesame.com.

The fair credit billing act also provides robust protection against fraud. If your credit card information was stolen in a data breach—like the famous incidents involving Target and Home Depot—you’re protected. Even if a thief uses your card details online or over the phone, you typically aren’t liable for any fraudulent charges. “If what’s stolen are credit card numbers, consumers should feel fairly confident that their rights are protected,” says Chi Chi Wu, a staff attorney with the National Consumer Law Center in Boston. Under the law, your maximum liability for unauthorized charges is $50, though Visa and MasterCard often waive even this amount.

Catching and Disputing Billing Errors Before It’s Too Late

Here’s where timing becomes everything. You have exactly 60 days from the date your billing statement was mailed to report an incorrect charge to your card issuer. This is your window of opportunity, and it’s important not to miss it. If you let those 60 days pass, your bank may still help you, but you lose your legal protections under the fair credit billing act.

This is why Thomas Nitzsche of ClearPoint Credit Counseling Solutions emphasizes the need to review statements actively. “There are a lot of people who don’t check their statements closely,” he notes. “They just assume the bill is right.” This casual approach backfired when Nitzsche himself discovered a recurring charge on his own account—but not until 11 months had gone by. While he was able to dispute it, the bank only credited him back two or three months of charges because the 60-day window had closed for the earlier transactions.

When you do spot an error, you can’t simply call your bank and expect full legal protection. “Calling isn’t enough,” Chi Chi Wu emphasizes. You must send your dispute in writing, preferably by certified mail. Include your name, account number, the disputed amount, and an explanation of why you believe you were charged incorrectly. The Federal Trade Commission offers a sample dispute letter template if you need a reference. If you have a receipt or proof—like evidence showing you were charged $500 instead of the $50 you agreed to pay—attach it. However, you’re not required to provide documentation. “If there was no receipt, the card issuer can’t automatically rule against you,” says Wu, though not having proof may make their investigation more difficult.

Fighting Fraud: Your Shield Against Unauthorized Charges

When your card is lost, stolen, or compromised in a data breach, the fair credit billing act gives you significantly more protection than it does for regular billing disputes. For one thing, you don’t have to send your complaint in writing. “Unauthorized use does not require you to dispute the charge in writing,” explains Wu. “You can do it over the phone.” This is a big advantage when you’re dealing with fraud.

Additionally, you get much more time to report unauthorized charges. While regular billing errors must be reported within 60 days, there’s no strict deadline for fraudulent use—though obviously, you should report it as soon as you discover it. The reality is that even if you don’t realize you’ve been victimized until months after a data breach, your rights remain intact. Your maximum liability remains $50 per card, and in practice, most card networks waive even this amount entirely. For online or phone fraud where only your card number is used (not the physical card), you have zero liability.

One critical limitation: if you authorize someone to use your card—such as giving your partner permission to make a purchase—you cannot later challenge those charges under the fair credit billing act. “If you give somebody your card or your number, you basically authorized them to use it,” explains Nessa Feddis, a senior vice president at the American Bankers Association. So if you lend your card to a friend and they make purchases you didn’t approve, that doesn’t count as unauthorized use in the legal sense.

The Investigation Process: What Happens After You File a Dispute

Once your card issuer receives your written dispute, the investigation clock starts. The bank has 30 days to acknowledge receipt of your complaint and inform you that it’s investigating. Then it has two complete billing cycles to resolve the matter. During this entire period, your bank is legally prohibited from reporting the disputed charge as a late payment to credit bureaus, and it cannot charge you interest or attempt to collect the disputed amount.

This means you’re in a holding pattern. Many people misunderstand what this protects—and what it doesn’t. “You’d be surprised by how many people think they don’t have to pay anything on their bill until the dispute is resolved,” says Ulzheimer. “The act does not give you that right. You can’t hide behind the act.” You still must pay the rest of your bill on time. Only the disputed portion can be withheld.

Once the investigation concludes, one of two things happens. If the bank determines the error was indeed in your favor, it must correct the billing error and send you a correction notice. Any related finance charges or late fees must be removed from your account. However, if the bank concludes you were charged correctly, it can resume trying to collect the debt—but it must provide you with a written explanation of its findings.

If you disagree with the bank’s conclusion, you have 10 days to formally challenge it. If you do, the fair credit billing act requires your bank to add a note to your credit report explaining that the charge is still in dispute. This note is somewhat limited in its power—it’s “largely cosmetic,” as Ulzheimer describes it—but it does inform other lenders that the charge is being contested. You can also ask your issuer for the evidence it used to reject your claim, which may help you understand whether the investigation was thorough enough.

When You’re Simply Unsatisfied: The Right to Withhold Payment

Here’s a feature of the fair credit billing act that many people don’t know exists: if you’re dissatisfied with the quality of a product or service you purchased with your credit card, you have the right to temporarily withhold payment on that charge while you work out the problem—but with important conditions attached.

First, you must make a good-faith effort to resolve the problem directly with the merchant. Contact them as soon as you have a complaint. Only if the merchant refuses to work with you can you escalate to your credit card company. Tell them you’ve been unable to resolve the issue and are invoking your right to withhold payment. At that point, your issuer must refrain from reporting the charge as delinquent to credit bureaus while the dispute is being resolved.

However, there are significant limitations. Your purchase must cost more than $50, and you must have bought the product or service in your home state or within 100 miles of your mailing address—unless you used a store card issued by the merchant itself, in which case these restrictions don’t apply. Internet purchases are particularly tricky because the right to withhold payment on online orders depends on your state’s laws. “If your home state doesn’t recognize this right, you may be out of luck,” notes Wu.

Here’s another critical point: you must invoke this protection before you’ve fully paid your credit card bill. “If you’ve already paid the amount that’s being disputed, then you can’t withhold payment,” says Wu. So if you notice a problem with a product or service, flag it immediately and don’t pay that portion of your bill until it’s resolved.

Taking Action: What to Do When Your Rights Are Violated

If you believe your card issuer has violated your rights under the fair credit billing act, you have several options. You can file a complaint with the Consumer Financial Protection Bureau or the Federal Trade Commission, both of which investigate consumer complaints against financial institutions. These agencies can investigate whether your bank violated the law and take action if needed.

You may also want to consult with a consumer lawyer who specializes in fair credit billing act cases. The National Association of Consumer Advocates maintains a directory of consumer attorneys organized by region. A lawyer can evaluate whether you have a strong case and help you pursue it.

The key message? Don’t assume the charges listed on your credit card statement are automatically correct, and don’t assume your rights disappear if you miss a deadline or make a mistake in your dispute process. The fair credit billing act exists specifically to give you recourse when things go wrong. The law is on your side—but only if you know how to use it.