We also help non-industry people interpret the stress of confusing banking jargon and simplify the complex, multifaceted layers of codes and regulations associated with chargebacks. However, that hardly negates the fact that chargebacks are a growing threat to merchants’ revenue and long-term viability.Īt Chargebacks911®, we work with merchants to create sustainable chargeback management strategies. It’s good that merchants don’t need to worry about return item chargebacks. While they can be triggered by criminal fraud or merchant error, chargebacks are most commonly the result of friendly fraud. They can be compounded by administration, penalty fees, and merchandise loss. Those can cause untold financial damage to a merchant.Ĭhargebacks are debits made on the merchant’s account. The chargebacks that merchants need to be concerned about are payment card chargebacks. Thus, they are not related to credit cards and have no bearing on the merchant. They consist of debits to a consumer’s checking or savings account. To reiterate, return item chargebacks are between customers and their banks. The more cooperative and communicative a merchant is, the better informed and less quick to react their customers will be. Another tactic that might help the situation is to include a section in one’s terms of service, explaining bounced checks and return item chargebacks as a matter for customers to take up with their issuing bank. Merchants should also work to make their return process extremely simple. The key is to be as clear and up-front with policies, billing descriptors, and other identifying details. Merchants and banks can help here by working to increase consumer awareness and understanding. This is why merchants must prioritize and improve communication with their customers at every opportunity. While return item chargebacks are issues between cardholders and their banks, merchants can still experience some blowback from the situation. If that check bounces, it’s labeled a return item chargeback, and the customer is hit with a fee. With a return item chargeback, the customer goes to their bank and deposits or cashes a check from a third party. Here, the merchant is rarely part of the equation. However, none of these charges are considered return item chargeback fees.Ī return item chargeback is an entirely different animal. If the check doesn’t clear, the bank can either pay the item and overdraw the account (making it an overdraft item) or return the item unpaid (marked “NSF” or “Non-Sufficient Funds”).Įither response results in a penalty fee to the consumer, and if your bank has to “bounce” the check, there may also be a fee assessed to your merchant account. A customer writes a check to a business, which is used to pay for a purchase. So, with that in mind, let’s take a high-level look at their functions and usage. That said, understanding what they are and how they work is still a good idea. So, if a return item chargeback isn’t a payment card chargeback, do merchants need to worry about them? For the most part, the answer is “no.” Questions about payment card chargebacks? We’ve got answers. Also, any fees are paid by consumers, not merchants.īottom line: the word “chargeback” is used to label two different processes that have little to do with each other. Here, though, the process does not revolve around credit cards. Using the word “chargeback” in the name makes it sound like a transaction dispute. You usually have no input on this decision in fact, you may not even know about it until you’re notified after the fact.ĭespite the name, a return item chargeback is not a credit card transaction dispute. At that point, the cost of the transaction is transferred directly from the merchant’s account to the cardholder’s account. The bank may initiate a chargeback if a customer disputes a payment card purchase but cannot resolve the issue by dealing directly with the merchant. Designed as a consumer protection device, chargebacks serve as a last resort for cardholders who are victims of fraud or dishonest merchants. When we use the word “chargeback,” we’re most often referring to a forced transfer of funds from a merchant to a consumer. Payment Chargeback: What’s the Difference? The difference mostly depends on whether the check was written to fulfill a debt, or if it was deposited or cashed. You're not far off if you think that sounds like a bounced check fee. Here, they define a return item chargeback fee as a charge applied “each time a check or other item that either cashed for or accepted for deposit to account, is returned to us unpaid.” Specifically, let’s examine the Other Account Fees and Services: Miscellaneous section. To illustrate this concept, let’s look at Bank of America’s Personal Account Fee Schedule.
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