Returns and refunds are inevitable in nearly any business environment. Merchants who deal with them know they can be headaches – especially when the purchases are made with credit or debit cards and customers claim the refunds were never received. This results in chargebacks to the business – requiring the merchant to provide documentation to the card companies proving they issued a refund. Furthermore, if the refund isn’t completed correctly, it can be difficult to reconcile their credit/debit card charges.

There are some simple steps that merchants and their employees can take to reduce the effects of refunds on their business:

  1. Disclose the return policy to customers at the time of purchase.  Clearly defined refund and return policies — printed on transaction receipts and invoices — can eliminate confusion.  They can also save customers from unproductive — and potentially frustrating — trips to the merchant location if they don’t offer refunds or honor them after a certain date.
  2. Don’t give cash refunds for purchases made on credit cards, and be sure the amount credited doesn’t exceed the original sale.  To keep all records in order, merchants must refund the card used for the purchase for the correct amount. Customers who receive a cash refund for a purchase originally made with a credit card may claim they never received the refund, resulting in a chargeback.  Merchants should issue one credit per sales receipt — in the correct amount — so the cardholder can “match” sales to credits.
  3. Retain the original transaction record for 24 months.  Keep documentation about the refund for two years in case you need to dispute a chargeback. Also, give customers a receipt or other written evidence of the refund for their records.
  4. Indicate even exchanges on customer and merchant receipts.  Proper documentation of even exchanges — when one product is traded for another of equal value — helps the merchant keep current on their inventory and your customer current on his/her purchases.
  5. Submit all credits on time.  The card companies require merchants to submit credits within a certain time period after refunds have been made.  For example, at Heartland, refunds must be submitted the same day the credit is issued. Meeting these deadlines ensures the appropriate refunds are posted to customers’ accounts in a timely manner — and confirms the accounts have been credited.

Following these simple steps can save merchants and their customers time, frustration and money; reduce chargebacks that distract merchants from focusing on their business; and helping them maintain good relationships with their customers.


If you have a high-risk business or there is a high volume of chargebacks, Consult with to discuss other methods and strategies to save your business time, money, and headaches.

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