Why did HDFC Bank bill a fraud transaction even when I raised a dispute within 20 mins after the transaction? What can I do now?*

TY for the A2A.

Assumption: The question pertains to a Credit Card transaction.

Worry not. Your experience is fairly common worldwide.

Credit Card Issuer Banks (HDFC Bank in this case) use Fraud Detection & Prevention (FD&P) software to, well, detect and prevent fraud in credit card transactions. It’s beyond the purview of this answer to go into the details of these systems but suffice to say that, there are serious technology, UX and cost challenges that preclude a fraud before it happens.

I’m not saying Credit Card Issuer Banks never prevent fraud before it happens but, in most cases, banks authorize a credit card transaction even if their FD&P software suspects it to be fraudulent before-the-fact, and confirms it to be fraudulent after-the-fact. In your case, the very fact that you, as the credit cardholder came to know about the transaction and raised a dispute means the said transaction was authorized i.e. not prevented before the fact.

To take the case of a transaction that has gone through and then confirmed by the bank to be a fraud, it will be posted to your account since it has gone through. Accordingly, it will appear on your monthly credit card statement. This is true regardless of whether you spotted the fraudulent transaction and / or raised a dispute about it. This is a fundamental fact of the credit card industry. Ergo, I said worry not in the beginning.

(a) Some banks will also post a reversal entry in the same statement, since they have ascertained that the transaction was fraudulent. This is the best case scenario for the cardholder: No action required, no monetary loss caused by fraud.

(b) Some banks won’t post a reversal entry in the same statement even though they have ascertained that the transaction was fraudulent. Then this is what happens:

(c) If you spot the fraudulent transaction, you need to raise a dispute again. Most probably, the bank will reverse this charge in the next monthly statement.

(d) If you don’t spot the fraudulent transaction, you will pay the amount, and the bank will coolly pocket the money. This is the worst case scenario for the cardholder: Loss of money due to fraud.

In many industries, (c) and (d) would be called shady practices or dark patterns and blockaded by the regulator.

But this is how banks operate. I’m saying this based on my experience of dealing with dozens of banks in half a dozen countries. And, sadly, fintechs have not been able to change the reality.

So, my recommendation is, just chill and repeat your dispute to your bank.

UPDATE-1:

I had my above answer reviewed by an ex-Banker who is familiar with the credit card dispute and customer complaint redressal process. They said I’ve already covered most of it but suggested the following addition:

If the Credit Card Issuer Bank takes it as a disputed transaction, then in some cases temporary credit won’t be given unless it wins the case with the merchant. But it will flag the transaction as a dispute. It means the transaction will still appear in the statement but with a flag in it. The specific action is also influenced by whether the Cardholder has or does not have previous history with said Merchant.

*: This is the original question I answered. I’m repeating it to help me make sense of my answer in case it’s moved to / merged with some other question that I didn’t answer.