The Return Item Chargeback…Not as Bad as You Think
These Aren’t the Chargebacks You’re Looking For.
Most merchants have an immediate negative association with the word “chargeback.” That’s completely understandable—you’re used to chargebacks costing you revenue, merchandise, and jeopardizing your business sustainability. However, a return item chargeback isn’t what you expect.
What is a Return Item Chargeback?
According to Bank of America’s Personal Account Fee Schedule, a return item chargeback fee, also called a deposited item returned fee or cashed item returned fee, is defined as a consumer penalty.
Let’s say a Bank of America customer writes a check, but there are not enough available funds in the corresponding account. The bank may overdraft the account, paying on their customer’s behalf and putting the account at a negative balance, or decline the transaction due to insufficient funds.
It’s different, though, if the customer deposits or cashes a third-party check, and that check bounces. The bank will access a return item chargeback fee to their customer. That’s why businesses typically access a bounced check fee any time one of their customers pays with a bad check; they’ve been hit with a fee through no fault of their own. The bounced check fee redirects that responsibility back where it belongs: with the person who wrote the bad check.
Distinguishing Merchant and Consumer Chargebacks
As an online merchant, the subject of chargebacks is confusing enough already. The fact that banks will use the same phrase to refer to a consumer-facing process just makes it that much more so.
Remember: a merchant chargeback is a debit made on your merchant account to cover a payment reversal initiated by a customer’s issuing bank. A merchant chargeback will result from one of three potential causes: merchant error, criminal fraud, or friendly fraud. This process forcibly withdraws funds from your account and moves them back to the cardholder’s. You will also receive a fee to cover the administrative costs of the chargeback.
While a merchant chargeback is merchant-facing, a return item chargeback is consumer-facing. These will only impact consumers’ checking accounts and have no impact on you as a merchant.
Don’t Let Your Guard Down
While a return item chargeback may not be a concern to you as a merchant, remember that merchant chargebacks remain a source of substantial profitability loss in eCommerce. Chargebacks are estimated to cost merchants upwards of $25 billion a year by 2020; that’s several billion more than that lost in criminal fraud attacks.
Learning to mitigate the impact of chargebacks is essential to protect your revenue and ensure that your business survives. This calls for a dynamic chargeback management strategy. Click here to learn more and ensure that merchant chargebacks never threaten your long-term business success.