The topic of chargebacks is a hot one. A topic so hot that just talking openly about chargebacks can get people stressed out and, frankly, a little bit angry. We understand this emotion. Chargebacks are costing you money, time, resources, and loading a lot of stress onto you. The good news is that you don’t need to feel stressed out or angry about return item chargebacks.
Nope, not one bit of anger, stress, or headache need be yours when it comes to return item chargebacks. No, we’re not be facetious or sarcastic. We’re actually sharing with you some great news: Return item chargebacks are not your problem and they’re not our problem.
So, why write about this type of chargeback if these are not going to impact your bottom line or cause a drain on your resources? Well, because we truly believe (and we’ve said it before) that knowledge is power. The more you know about what your customers and issuers are dealing with, the better you are able to make smart business decisions.
What Exactly is a Return Item Chargeback?
A return item chargeback occurs between a customer and their issuer or bank. A customer receives notification of a return item chargeback when there are insufficient funds in their account to cover the cost of a check or withdrawal. This results in a fee being charged and automatically withdrawn from the customer’s account.
Each bank or issuer has different language for this charge. For example, here’s the terminology that some of the major banks in the United States use when identifying this charge:
- Bank of America: Deposited Item Returned with $12 charged to the customer
- Wells Fargo: Cashed/Deposited Item Return Unpaid with $12 charged to the customer
- S. Bancorp: Return Deposited Item or Cashed Check with $19 charged to the customer
- HSBC: Chargeback with $10 charged to the customer
- Capital One: Rejected Check with $9 charged to the customer
- TD Bank: Cashed or Deposited Item Returned with $15 charged to the customer
As you can see, there is very little common language used, and from the customer’s perspective the message really isn’t clear. Using the word chargeback also complicates things for everyone involved (we can only imagine the customer service calls…).
Why Do These Charges Matter to You?
The more you know, the better you can communicate and work with everyone you rely on to build and maintain a successful business. This includes understanding return item chargebacks and how they impact your customers and issuers.
These charges are simply one more thing that the people you’re doing business with are having to manage and understand. No, there is nothing you can do about these chargebacks. However, you can review the language the banks are using and then think about how you’re communicating with your customers.
For example, think about your billing descriptors on customer credit card statements. How clear and obvious are these descriptors? Is it obvious to the customer what the charge is for? Are you using your commonly known business name, or are using the name of your holding company? Have you thought about including descriptors that include details on the item purchased, where it was purchased, and how it was purchased?
This doesn’t sound like much, but remember the confusing messages customers are receiving from their banks. Now, think about how and why a customer might feel compelled to contact their credit card company when they see a charge on their statement that they don’t recognize. It kind of makes sense, now doesn’t it?
Customers are confused. They don’t always understand the charges are on their credit card statement. They’ve been charged a fee by their bank for something they don’t understand. This confusion adds up and comes back to you in the form of a chargeback.
That’s why it’s important that you take all the steps you can to make it easy and straight-forward for your customers to interact with you. This stems from the initial research on your website about the item they want to purchase, to reviewing the refunds and return policy, to experiencing a simple authorization and authentication system, and to finally receiving the item on time.
To help ease this confusion and to make doing business easier with you, we want you to think about using a system such as CDRN that allows you to communicate directly with your customers. Remember, your customers might not have a great relationship with their issuer or bank, and now they’re trying to work with this institution to manage their chargeback. And your processor/acquirer is dealing with the time, energy, resources and stress associated with chargebacks.
When you’re able to work directly with the customer, you can bring the stress level down, you can get to the root of the problem quickly and efficiently, and chances are very high that in the end the customer will be satisfied and the chargeback will be resolved in your favor.
It’s that kind of knowledge. The more you know, the better you can work with your customers. The more your customers know about the charges on their credit card statement, the less quick-to-react they will be. And your processor or acquirer will be relieved to not have to manage another lengthy and costly chargeback process.