If we were to take a survey, we bet chargebacks would be high on the list of words that trigger indigestion among merchants, so let us stop right here and put your mind at ease.
This is not a typical post about chargebacks.
It’s about return item chargebacks—a specific term that has caused a lot of confusion because it’s sometimes used synonymously with the word chargebacks. In reality, the two terms are very different, so here’s exactly what you need to know.
A return item chargeback not a typical chargeback fee. Chargeback fees are assessed when a cardholder disputes a transaction appearing on their statement either because of a merchant error or—more likely—fraud. The issuing bank then authorizes the return of funds to the consumer, and on top of that, the merchant gets slapped with a chargeback fee. A return item chargeback, in contrast, has nothing to do with credit or debit card accounts.
It’s essentially a bounced check fee.
Let’s look at how Bank of America defines a Returned Item Chargeback Fee (also referred to as a Deposited Item Returned or Cashed Item Returned Fee):
“We charge this fee each time a check or other item that we either cashed for you or accepted for deposit to your account is returned to us unpaid.”
So, it could refer to a check written directly to an individual, or it could be a third-party check that was signed over to the individual. Either way, the bank determines there are not enough funds in the issuer’s account to cover the transaction, and the person to whom the check was written is assessed a penalty. You shouldn’t have to pay a thing. This is probably the most important point of all. Return item chargeback fees are the responsibility of the consumer and funds are debited from their account—which means as a merchant, you shouldn’t have to worry about return item chargeback fees at all.
Of course, real chargebacks will happen. And when they do, we’ll be here. It’s nice to know there are some fees you don’t have to worry about, but it doesn’t change the fact that chargebacks will happen.
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