The topic of chargebacks is a hot one. It’s a topic so hot that just talking about chargebacks can get people stressed out and, frankly, a bit angry. After all, chargebacks are costing you in money, time, resource drain, and stress.
However, not one bit of anger, stress, or headache need be yours when it comes to return item chargebacks. We’re sharing with you some great news: Return item chargebacks are not your problem.
So, why write about this type of chargeback if it is not going to impact your bottom line? It’s because we truly believe that knowledge is power. The more you know about what your customers and issuers are dealing with, the better you will be able to make smart business decisions.
What Exactly Is a Return Item Chargeback?
A return item chargeback occurs between a customer and their 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 This results in a fee being charged and automatically withdrawn from the customer’s account.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 terms and policies for this type of charge. Here are some examples of how some major banks in the U.K. handle return item chargebacks and what they call them:
- Lloyds Banking Group: Returned Items with £10 fee for each item (maximum of three returned item fees per day) charged to customer unless amount of the payment declined is £10 or less
- Barclay’s: Overdrafts and bank charges with various fees charged to the customer
- Royal Bank of Scotland: Arranged overdraft, unarranged overdraft, and unpaid transaction fees with a £6 fee for each unpaid transaction
- HSBC: Overdraft Service resulting in various fees or possible refusal of payment
As you can see, there is very little common language used, and from the customer’s perspective the message is not always clear.
Why Do These Charges Matter to You?
These charges are one more complicated matter that the people you’re doing business with have to manage and understand. While there is nothing you can do about these chargebacks, you can review the language the banks are using and think about how you’re communicating with your customers.
For example, think about your billing descriptors that appear on customer credit card statements. Are they clear and apparent in their description of your business? Is it obvious to the customer what the charge is for? Are you using your commonly known business name, or the name of your holding company? Do your descriptors include details on the item purchased, where it was purchased, and how it was purchased?
This may not sound like much, but keep in mind the confusing messages customers are receiving from their banks. And why might a customer feel compelled to contact their credit card issuer when they see a charge on their statement that they don’t recognise?
This is 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 begins with the initial research customers do on your website about the item they want to purchase, to reviewing the refunds and return policy, to experiencing a simple authorisation and authentication system, and then finally receiving the item on time.
To help prevent customer churn or dissatisfaction, we suggest using a system that fosters direct communication with your customers.
When you’re able to work directly with the customer, you can resolve confusion about transactions quickly and efficiently, and in the end your customer will be satisfied and the chargeback may well be prevented from ever occurring.
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 confused and frustrated they will be. And your processor or acquirer will not have to manage another lengthy and costly chargeback process.