Navigating Return Item Chargebacks

JonCarlo Hernandez-Lopez
August 19, 2025

The term ‘return item chargeback’ often stirs confusion. It’s not directly tied to the typical chargeback process in card transactions and in fact, return item chargebacks aren’t even chargebacks at all. So what do merchants need to know?

Key Takeaways

A “return item chargeback” isn’t a card chargeback. It’s a bank fee that may be assessed when a check you deposited is returned unpaid.
Many large U.S. banks now list $0 for deposited items returned on business accounts; some still charge for re-presenting a returned check.
How common is it? The Fed processed 23M returned checks out of ~2.98B collected in 2024 (~0.77%), up from ~0.62% in 2022. Trend: modestly rising returns amid fraud pressure.
Costs you should model: lost check value + any re-presentment fees + operations time; good news is the “old” $20–$40 per-item fee is increasingly outdated for major banks.
Reduce exposure with clear payment terms, verification, transaction monitoring, and documented follow-up.

Unraveling Return Item Chargebacks

If a ‘returned item chargeback’ isn’t a chargeback, what is it? It’s the bank’s handling of a deposited check that bounces (e.g., insufficient funds, stop payment, suspected fraud). Historically, banks would charge merchants a fee for each return item chargeback. They use various labels to describe this fee, including:

Returned check fee
Cashed/deposited item returned unpaid
Rejected check fee
“Chargeback check” fee

In 2025, many large banks have eliminated the fee for the returned deposited item itself on business accounts. For example, Wells Fargo’s business addenda shows “cashed/deposited item unpaid…No fee.” Bank of America’s business schedule shows a $14 fee for “Deposited Item Recleared (Redeposit)”, or asking them to try the check again.

Regulatory backdrop: In 2022, the Consumer Financial Protection Bureau (CFPB) stated that blanket policies of charging deposited item fees are likely unfair. As a result, most institutions have removed them.

Impact on Merchants

Return item “chargebacks” hit merchants on three fronts: finances, operations, and banking relationships. When a deposited check is returned, you lose access to those funds until (or unless) you recover them and may also incur a re-presentment fee. Operationally, teams must chase the payer, reissue invoices or credits, and unwind ledger entries, slowing your cash-conversion cycle and tying up working capital. And if returns become a pattern, your bank may apply extra scrutiny to future deposits or impose tighter limits.

The True Cost of a Return Item Chargeback

Fortunately for merchants, many large banks have done away with the $20-40 fee that was commonly assessed for return item chargebacks. However, some still assess a re-presentment/reclear fee in the $10-20 range if you ask them to run the check again. Overdraft fees are separate and apply on the payer’s account; for example, Chase notes no overdraft fee when a check/ACH is returned unpaid. When you model impact, budget for: the temporarily lost principal, any re-presentment fee you choose to incur, internal handling costs (collections, support, accounting), and risk tooling for monitoring/verification.

How Often Do Returns Happen?

Using the Federal Reserve’s publicly updated 2025 datasets, we can observe a steady increase in the percentage of returned checks:

2024: 23 million commercial checks were returned out of ~2.978B collected → ~0.77% return rate (Fed-processed items).
2023: 22M / 3.146B → ~0.70%.
2022: 21M / 3.374B → ~0.62%.

While this may seem like an inconsequential figure, it’s worth keeping an eye on, especially in light of the Atlanta Fed’s recently published research observing a rise in fraud within returns post-pandemic.

Note: Fed data reflects the share of items handled by the Federal Reserve, not all “on-us” or private-clearinghouse checks, but it’s the most current, consistent benchmark available.

Proactive Strategies to Minimize Return Item Chargebacks

1. Know Your Customers

To the extent possible, verify payers up front. Confirm business legitimacy and use any available account-standing signals. Then watch behavior over time: flag repeat bounces, inconsistencies, or mismatches, and reach out early to resolve NSF or stop-payment issues before they snowball.

2. Set Crystal-Clear Payment Terms

Spell out accepted payment types, due dates, and the consequences of NSF/returned checks in plain language, and publish refund/return policies where customers can’t miss them. Offer safer alternatives like validated ACH, RTP/FedNow where supported, or cards for higher-risk payers, to reduce the chance of a bad check in the first place.

3. Keep Thorough and Consistent Records

Capture full transaction context (payer, date, amount, memo, channel, and any authorization evidence) and retain all correspondence and delivery confirmations. Layer on real-time monitoring with alerts so suspected fraud or repeat returners are surfaced and actioned immediately.

FAQs

Are return item chargebacks the same as credit card chargebacks?

No. Card chargebacks are disputes initiated by the cardholder via the issuer. Returned deposited items happen when a check you deposited bounces (NSF, stop, fraud, errors).

What do banks actually charge in 2025?

At many large banks, the returned deposited item line for business accounts is $0. Where fees do appear today, they’re often for re-presenting the returned check (e.g., $14 at Bank of America). Always check your bank’s current schedule.

Is charging for returned deposited items illegal?

The CFPB warned that blanket returned-deposited-item fees are likely unfair under the Consumer Financial Protection Act, and it observed most institutions have eliminated these fees, but policies vary and enforcement evolves. Consult your counsel and your bank’s latest disclosures.