Chargeback Management

Return Item Chargeback - Definition & Explanation

Return Item Chargebacks

When you start to take fighting chargebacks seriously, you begin to find that there are many different kinds of chargebacks besides the familiar ones that result from credit card transactions. Or rather, that there are a number of disparate things that share the name “chargeback.” Different payment schemes like PayPal and ACH do have their own chargeback equivalents, but one type of chargeback that you may have heard of isn’t tied to any specific platform, and isn’t the same as a credit or debit card chargeback: the return item chargeback. How worried do merchants need to be about return item chargebacks?

New call-to-actionWe won’t draw out the suspense. The answer is, not at all. Return item chargebacks affect consumers, not merchants. They can’t impact a merchant’s revenue, or their chargeback rate, or their reputation with customers. You don’t need to include them in your chargeback defense strategies or look into third-party tools designed to prevent them. The only thing it has in common with credit card chargebacks is the name.

You can breathe a sigh of relief whenever you hear something about return item chargebacks, but it is always a good idea to investigate further when you hear a chargeback-related term you aren’t familiar with. Novel payment schemes breed novel forms of fraud, and to maintain consumer confidence there has to be some way to claw back unauthorized payments—which may or may not be called “chargebacks.”

It can get confusing, but the important thing is to keep your eyes and ears open and thoroughly research any new type of payment you’re thinking about accepting.

So What Are Return Item Chargebacks?

Merchants who have experience with the old brick-and-mortar store days when customers would frequently pay with personal checks might remember the old signs above the cash register, warning customers that anyone who bounced a check would incur a fee. This fee wasn’t just a deterrent—while the person who wrote the bad check always gets hit with a significant fee from their bank, the party that deposited the bad check gets a small financial penalty from their bank, too.

The check bouncer’s fee is typically called a “Non-Sufficient Funds” or NSF fee, while many banks refer to the depositor’s fee as—that’s right—a return item chargeback. Why choose a name so closely associated with a completely different and contentious process? You’ll have to ask the banks.

Note that not every bank calls it by this name, but nearly all consumer banks have this type of fee, typically around $10 to $15, which they charge any time the customer cashes or deposits an item that ends up getting returned unpaid to the bank.

Are You Sure Merchants Don’t Need to Worry About Return Item Chargebacks?

Merchants can still incur return item chargebacks when their customers pass bad checks off on them, but not every merchant accepts personal checks, or needs to, and merchants have legal remedies they can pursue.

Download the eGuide, 4 Reasons to Hire a Chargeback Management CompanyWhile merchants have no great cause to fear actual return item chargebacks, some people might incorrectly use the term “return item chargeback” to refer to credit card chargebacks that involve disputes over product returns. There are chargeback reason codes that specifically relate to returns: “Credit Not Processed” and “Credit Not Received” refer to situations where the cardholder has returned an item, or the item was damaged or missing, and the merchant will not issue a refund. Less straightforward return-related disputes may come through on other reason codes.

This is a good time to remember how important a flexible, customer-friendly refund policy can be when it comes to preventing chargebacks. It’s never worth refusing a refund only to have it turn into a chargeback down the line. The refund will always cost you less, take less of your time and labor, and can help maintain a good relationship with the customer. Refunds don’t come with fees attached, like chargebacks do, and they don’t increase your chargeback rate.

It should always be easy for customers to reach you via phone or email to report an issue and request a refund. If a customer abuses a generous return policy you can always refuse further business with them, but stonewalling a customer who is trying to work out a problem directly with you is a recipe for unhappy customers and lots of chargebacks.

Sometimes cardholders get impatient and assume a refund isn’t coming when, in fact, the merchant simply hasn’t gotten around to processing it. When you agree to provide a refund, process the credit promptly, or at least give the customer a realistic timeline about when they can expect it. It can also help to ask them to give you an email address or phone number you can call or text to let them know when you’ve processed it.

Just be careful not to issue a refund once a dispute has progressed to the chargeback phase. At that point, issuing a refund is almost certainly going to put you in a double refund situation where you’re out twice the money—once from the chargeback, and again from your own refund—plus all the chargeback fees.


Dealing with chargebacks can be confusing and challenging enough without misleading nomenclature getting into the mix, but here we are. Know that actual return item chargebacks aren’t anything related to your credit card chargebacks, but don’t tune out the conversation if you hear anybody bringing them up in relation to your business—there’s a chance they’re just using the wrong term to talk about the dangerous kind of chargeback.

When the ever-changing world of chargebacks gets overwhelming, remember that there are experts who can help you navigate the jargon, the definitions, and all the payment platforms new and old, helping you develop and execute strategies to cut down your chargebacks and avoid future disputes. Many anti-chargeback strategies have a notable side effect: they increase customer satisfaction and loyalty. The methods discussed above for preventing refund-related chargebacks can generate loyalty and repeat business when customers see that you’re willing to listen, take their concerns seriously, and do what must be done to resolve them.

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