Buyers need not only an understanding of the benefits and value of what you are selling, they also need clearly stated billing, return, shipping and other policies important in their decision making process. This guide will focus on the essentials of a card payment refund policy:
A good return policy can help close sales. Your return policy or lack thereof can justify higher or lower cost as reflected by higher or lower risk of buying from you in the mind of your customer. Your return policy can even define your brand - think Nordstrom.
Handling refund requests in a way that makes good business sense and achieves 100% customer satisfaction is the goal. Consider your options. Will you offer a full refund, in-store credit, exchange only, or are all sales final? The complexity of your return policies will vary depending on your business.
Consider what you sell and who your customers are when establishing a return policy. Begin by reflecting on the value of the goods or services you are selling. Will you require the original sales receipt? Are there any time or condition requirements for acceptable returns? Who pays return shipping? Put yourself in the customer’s position and test your policy by getting feedback from friends and family. How would you feel about doing business under these conditions? Will your policy seem fair and make sense to your customer?
A store credit towards a future purchase is common and seen as an acceptable policy to many buyers. An alternative use of gift cards is to issue them for awarding in store credits. Gift cards can be a great way to retain revenues and provide customer convenience.
Once you have developed your return policies, do not bury them deep within your web site or in the fine print. Be open and up front. Accepting card payments is a convenience form of payment, not a guaranteed form of payment. All the rules and regulations are written in favor of the cardholders. Therefore, it’s very important to protect your interest with these best practices:
Because card payments are subject to chargebacks, refund requests that go unaddressed, or are not handled in a way that is satisfactory to your customers, can lead to chargeback disputes. A chargeback means that the amount of the original card sale that was deposited into your business checking account is taken back out. In disputes, payment card issuers will look to see how clearly your policies are stated to the cardholder. Is it reasonable to expect that they purchased with full knowledge of your return policy? And the key to this is the signature evidence next to your refund policy disclosure.
Note that if you maintain a policy such as “No Refunds” or “All Sales Final” the product or service is still expected to work as advertised and be what was ordered; otherwise, merchants still face "Not as Described" chargebacks. "Not as Described" chargebacks are most common due to defective merchandise or service disputes.
Quick Reference Helpful Hints:
“Credit not processed” chargebacks occur when the cardholder alerts their issuing bank that they have requested and are due a refund which has not been credited. In some instances, a merchant issues a credit voucher yet it has not appeared on the customer's online or card statement.
Quick Reference Helpful Hints:
If a credit is issued to the cardholder before you receive a chargeback notice, respond to the chargeback with your documentation that a credit has already been granted.
If the chargeback is initiated before you issue a credit (customer contacts their issuing bank before contacting you) then respond with documentation containing signature evidence that the cardholder agreed to your return policy. Also indicate whether or not the cardholder has followed your return procedures or if they have returned or are still in possession of your goods or services rendered. If you agree to the refund in this instant, you should accept the chargeback. Do not issue a credit on top of a chargeback as this will create a duplicate “refund”.
Make sure that end-of-day batch reports match the deposit to your bank. If a refund is present within a batch total then make sure there is supporting documentation for the refund. A best practice is at least a monthly audit of all refund transactions – matching original card sales and card numbers to approved refunds and card numbers.
When available on your point of sale device, password-protect the refund function. Only allow managers to perform card holder credits. And beware of employee theft! Elaborate criminal embezzlement schemes from bookkeepers have been uncovered where card refunds are issued to personal or conspirator card accounts, sometimes in place of legitimate authorized customer returns and others on invented entries.
Take notice of debits to your business checking account. Make sure the debits are not a result of unauthorized refunds being processed through your merchant account. If you notice suspicious refunds to credit cards then contact your merchant services provider immediately. With the help of the card issuing fraud department, they may be able to determine if the card being refunded has a pattern of fraudulent refund activity.
One way to lower your bottom line costs of accepting credit and debit card payments is to have the credit voucher Interchange returned when you process cardholder credits. Don’t overlook merchant rate savings from cardholder returns. Credit Voucher Interchange should be returned to the merchant when credits are processed. In doing so, the original fees billed for processing the card sale are offset by the return of fees back to the merchant when a refund is issued on the card.
Merchants should check their merchant processing statements, calculate their annual cardholder return volume and identify how they are billed for processing cardholder returns. Don’t leave savings from credit voucher Interchange on the table. Merchants should seek a direct Interchange pass through billing from their merchant account provider. However, not all Interchange pass through rate programs are the same and many do not return the credit voucher Interchange. Get a quote now at http://merchantrates.com to see the Visa, MasterCard and Discover card credit voucher Interchange rates.