Return item chargebacks are a misnomer, as they are fees customers pay for bounced cheques.
Unlike standard chargebacks, which involve disputes over card transactions between customers and merchants, return item chargebacks are fees imposed by banks on customers when a deposited check is returned unpaid - these do not directly affect merchants.
Although fees are levied on cardholders, merchants may still be affected by “friendly fraud” or customers who don’t understand this fee and try to initiate a chargeback as a result. Banks may also charge merchant depositors of bounced cheques in some instances.
Below, we discuss how exactly merchants can prevent return item chargebacks and address their possible risks and consequences.
What are return item chargebacks?
While the name may be confusing, it is important to understand that this is a fee for bounced cheques and not actually a chargeback. There are no disputes initiated for a reversal of funds, nor is this a consumer protection mechanism.
For instance, if a customer deposits a check from a client that lacks sufficient funds, their bank may reverse the deposit and charge a return item fee.
Return item chargebacks are an accountability measure banks impose on customers to make sure that cheques are in good standing.
Other names for return item chargebacks include:
- Deposited item returned fee
- Returned cheque fee
- Cashed item returned unpaid fee
- Deposited item returned unpaid fee
- Rejected cheque fee
- Chargeback cheque fee
Related: What is a Chargeback and How Is It Avoided?
What happens when a cheque bounces?
When a customer writes a cheque to a merchant and it bounces, the bank can pay for the item by:
- Overdrawing the customer’s account, or
- Returning the item unpaid due to non-sufficient funds (NSF)
Customers will be responsible for penalty fees for the overdraft or NSF, in addition to a return item chargeback.
The return item chargeback is usually a smaller fee pertaining to the bounced cheque that was deposited or cashed by a third-party.
Return Item Chargebacks Risks for Merchants
Merchants aren’t fined during a return item chargeback, since there was no sales transaction. However, banks may charge merchants if they are the ones who wrote the bad cheque. This incentivises depositors to verify that cheques are valid and acts as a precaution against fraud.
Despite communicating customer responsibilities and fees for bounced cheques, merchants still run the risk of receiving a bad cheque. This can inadvertently invite “friendly” fraud or chargebacks for customers who do not recognise returned item fees on their bank statements, which presents a real risk to merchants’ revenue.
Related: Chargeback Fraud 101: What Businesses Need to Know
Return Item Chargeback Names and Fees by Bank
Return item chargebacks generally incur fees between $10 and $20 for domestic cheques, and $15 to $40 for foreign cheques.
Below is a reference list of bank terms for return item chargebacks and fees charged to customers:
Bank of America
- Deposited Item Returned, Deposited Returned Fee, Cashed Item Returned Fee
- $12 fee
Wells Fargo
- Cashed/Deposited Item Return Unpaid
- $12 fee
U.S. Bancorp
- Return Deposited Item, Cashed Cheque
- $19 fee
T.D. Bank
- Cashed Item Returned, Deposited Item Returned
- $15
Capital One
- Rejected Cheque
- $9 fee
HSBC
- Chargeback
- $10 fee
Preventing Return Item Chargebacks
While return item chargebacks are typically triggered by a customer's bank, they can still impact your business through confusion, disputes, or even chargeback claims. Here’s how to reduce your risk:
- Encourage card and digital payments whenever possible. Reducing check usage lowers the chances of dealing with returned items entirely.
- Use check verification tools if you must accept checks. These services can flag high-risk or non-sufficient funds (NSF) accounts in real time.
- Be proactive with customer communication. Make it clear that any returned check fees are issued by the customer’s bank—not your business. Consider adding a short note in your payment or return policy.
- Train your team. Customer support reps should be prepared to explain bank fees and help prevent confusion from turning into chargebacks.
Preventing return item chargebacks starts with reducing check risk and improving clarity around your policies. A few small changes can go a long way in protecting your chargeback ratio and customer relationships.
Other Best Practices
- Post clear and visible cancellation, return and refund policies prior to the checkout process
- Make sure customer service contact information is easy to find and access
- Ensure your return process is straightforward for customers to follow
- Require the right customer information for every transaction:some text
- Full Name
- Phone Number
- Email Address
- Billing Address
- Shipping Address
- Full Card Number
- Expiration Date
- CVV Security Code
- Use Address Verification Service (AVS) and 3-D Secure to validate cardholder information
- Always ask for Card Identification Number (four-digit security code on the card face) for card-not-present transactions
Related: Chargeback Prevention Guide
Looking Forward
You likely have questions about the impact of return item chargebacks on your business, or perhaps other chargeback matters.
Contact us for answers and solutions. Our customer service is here to help at no cost to you.
Once there, you can also sign up for a free demo of our service. ChargebackStop can eliminate up to 99% of chargebacks.
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Visit ChargebackStop.com to find out how.
FAQ
What is a return item chargeback?
Return item chargebacks are a misnomer, as they are not actually chargebacks so much as a fee banks charge for customers who deposit bad cheques.
Other names for return item chargebacks include: deposited item returned fee, returned cheque fee, deposited item returned fee, rejected cheque fee, chargeback cheque fee.
What is the difference between a return item chargeback, an overdraft fee, and a non-sufficient funds (NSF) fee?
Return item chargebacks are fees charged to depositors of bad cheques.
Overdraft and non-sufficient funds (NSF) fees affect the cardholder who bounced the cheque and did not have sufficient funds to cover the payment.
What are the fees for a return item chargeback?
Return item chargebacks generally incur fees between $10 and $20 for domestic cheques, and $15 to $40 for foreign cheques.
