Yes, step one is to talk to the seller. Always best to be firm but polite. I've bought computer parts that didn't work as described and I went through the troubleshooting and gave the seller screen shots. That way he knows you aren't some crackpot.
If you can't reach an agreement with your seller, do a chargeback on Paypal. Go through Paypal
before going through your CC. Also keep in mind you only have 45 days to initiate a chargeback.
Then if that doesn't work file for a chargeback on your CC.
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So I first have to ask this guy for my money back, right?
then file a complaint?
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Yes. Most disputes can be settled person to person without having to tarnish the person's name. If you bought a defective item from a Brick & Mortar store, would you first try and have the charges reversed on your CC, or would you take it back to them?
Even if you think the guy is trying to screw you, it's best to be professional if possible. It doesn't mean you have to sit there and take it, but being nice can't hurt.