Tom-Chris Emewulu
Chargeflow's Digital Evangelist
Table of contents

TL;DR: A return item chargeback is a fee that financial institutions charge customers for a bounced cheque. They place these fees in the customer's checking account. The fees range between $10 and $20 for domestic cheques and between $15 and $40 for foreign cheques. Return item chargebacks have nothing to do with merchants; they’re between customers and their banks.

You may have heard the saying: If it looks like a duck, swims like a duck, and quacks like a duck, it probably is a duck.

Yet, with return item chargebacks, the name can be deceiving as a return item chargeback has nothing to do with least not in the traditional sense of what chargebacks mean.

As part of our goals to provide eCommerce merchants with uncommon insights, tools, and resources to 10x their business growth, this article will explore the concept of return item chargebacks. We'll help you understand EXACTLY what return item chargeback is and is not.

Plus, you’ll learn how to ensure this confusing payment instrument does not offset your revenue goals or customer relationships.

What Is Return Item Chargeback?

A return item chargeback is a fee that financial institutions charge customers for a rejected cheque. They place these fees in the customer's checking account.

Thus, in more straightforward language, a return item chargeback, sometimes called a deposited item returned fee or returned cheque fee, is fee banks charge any customer that deposits a dud cheque.

Don't be misguided by the name.

Return item chargebacks are far removed from order not as described chargeback, where banks forcefully debit a merchant's account when the cardholder files a transaction dispute.

Again, return item chargebacks have nothing to do with credit or debit cards and have zero bearing on sellers.

To understand the concept better, let's contrast return item chargebacks with traditional chargebacks. Legacy chargebacks are a remediation instrument backed by Federal law to foster accountability and fair play in card transactions. They're a consumer protection mechanism empowering buyers to initiate a dispute and recoup transaction funds from their bank or card issuer when said cardholder and the seller cannot remediate the issue directly.

On the other hand, return item chargeback is an accountability measure banks use on their customers. Consider it a correctional tool banks apply so that folks depositing cheques into their accounts or cashing out third-party cheques are sure the cheques are in good standing.

Banks incur costs whenever an individual issues a bad check. So if someone wrote a cheque but didn’t have enough funds in their account, causing the cheque to bounce, the bank would charge the drawee, the person directed to pay a fee popularly known as return item chargeback. And the drawer, the person issuing the check will pay a non-sufficient funds fee to their bank.

That brings us to the next point:

Return Item Chargebacks Vs. Overdrafts Vs. Non-Sufficient Funds

The most practical way to better understand the above concepts is to extend our conversion from the previous passage.

When a cheque you received from a customer does not clear due to insufficient funds, one of two things happens:

  1. The financial institution temporarily covers the deficit with an overdraft, giving the account a negative balance. Overdrafts attract fees and interest on the overdrawn amount.
  2. The bank marks the item as Non-Sufficient Funds or NSF, returning the cheque as unpaid. Like the previous scenario, the customer will incur a fee if a check bounces. You, the seller, could also face some charges if your bank has to return the cheque.

But none of the above charges translate to a return item chargeback fee. For a return item chargeback, the bank charges the customer for presenting a bad check.

Here's how the scenario plays out:

First, the customer receives a check from a third party. They then visit their bank to either deposit or cash the check. If that check bounces for whatever reason, the bank labels it and hits the customer with a fee.

That fee is called a return item chargeback, usually less than an overdraft or NSF fee. Again, return item chargebacks are NOT attributed to the merchants, as there was no sales transaction.  

To summarize:

  • Return item chargebacks are fees financial institutions like Bank of America charge their customers for bounced checks.
  • Overdrafts happen when a bank account holder spends more money than is available, resulting in a negative balance.
  • Non-Sufficient Funds occur when an account holder attempts a transaction with insufficient funds, and the bank declines.
  • Merchants are rarely part of the return item chargebacks equation unless the merchant was responsible for the bounced check.

While these three concepts overlap at some point, as they all primarily border around funds availability, clear distinctions abound, as we've noted; and you must approach them as such.

Do Return Item Chargebacks Affect Merchants?

The answer to that question is NO.

Return item chargebacks have no direct impact on merchants.

Yet, your customers can quickly be thrown off by such charges on their statements. And they may assume you're responsible for the bill, which can eventually result in actual chargebacks. They could also try to use friendly fraud to recoup their losses.

So if you're wondering why you should invest your time reading this piece, there you have it. You still need to understand the concept even though return item chargebacks are a matter between cardholders and their banks.

How should you ensure you don’t face adverse consequences due to the deductions? Below is some standard due diligence to consider:

  • Make customer communication a top priority and continuously work on improving it.
  • Work with your bank to enlighten your community about return item chargebacks.
  • Communicate policies and other identifying details up front, and use explicit billing descriptors.
  • Ensure your return process is straightforward for customers to follow.
  • Consider adding a section to your terms of service that explains customers' responsibility for bounced checks and return item chargebacks with their bank.

Collaborating directly with the customer can significantly alleviate stress, facilitate the prompt and effective resolution of issues, and enhance the probability of achieving a favorable outcome, all while ensuring utmost customer contentment.

Return Item Chargebacks According to Banks

Aside from the confusion of using the word "chargeback" to describe the concept, return item chargebacks go by various names depending on the bank that charges them. Here is a list of terms used by certain banks in the U.S. to identify this charge and the amounts charged:

Bank of America: Deposited Item Returned, Deposited Item Returned Fee, or Cashed Item Returned Fee, with $12 charged to customers.

Wells Fargo: ashed/Deposited Item Return Unpaid, with $12 charged to customers.

U.S. Bancorp: Return Deposited Item or Cashed Check, with $19 charged to customers.

T.D. Bank: Cashed or Deposited Item Returned, with $15 charged to customers.

Capital One: Rejected Check, with $9 charged to customers.

HSBC: Chargeback, with $10 charged to customers.

It can be perplexing when there is no uniformity in the terminology. And it's even more baffling when a particular term applies to a customer checking issue and an unrelated merchant process. Without a thorough understanding of both terms, it can lead to either overemphasizing or underemphasizing the wrong issue, resulting in paying too much or too little attention.

With that said, note how fast-rising eCommerce merchants are recovering payment chargebacks without lifting a finger.

Pre-empt Payment Chargeback Losses With Chargeflow

In closing this piece, it’s worth emphasizing that while return item chargebacks do not directly affect your business, as they're primarily between banks and their customers, payment card chargebacks do.

eCommerce chargebacks come with multiple losses. And your job, as a disciplined business owners, is to seek out the best practices to plug that revenue leak.

Despite growing awareness of chargeback prevention strategies and tools, industry records still show a spike in chargeback fraud. Consequently, even if you apply all the best practices and tips online, you still can't stop determined criminals from seeking loopholes in the chargeback process to steal from you.

So as much as return item chargebacks is not a significant cause for concern, understanding how to pre-empt revenue losses from payment chargebacks is primal.

I invite you to explore Chargeflow and see how we’re partnering with merchants to recover disputes on autopilot. While the industry chargeback recovery average hovers around 12%, Chargeflow's early adopters are getting increased chargeback win rates of ~60% to 85% and saving approximately $4,200 on monthly employee costs.


Average Dispute Amount
Average Dispute Amount
# Disputes Per Month
# Disputes Per Month
Time Spent Per Dispute
Time Spent Per Dispute
You could recover
$500,000 and save
1,000 hours every month with Chargeflow!
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