This may seem obvious to some of you, but it deserves mentioning none-the-less.
Perhaps at one time or another you’ve thought to issue a cash refund on a purchase made on a credit card. Maybe at the time you were busy and it seemed a simple way to resolve the issue, or maybe that’s just how you thought it was supposed to be handled. In either event, if no repercussions occurred you can count yourself lucky.
Consumer credit card fraud has always been a concern for businesses who accept credit cards. I’m sure you’ve heard all about skimming, carding, and phishing in the media. Well, another popular form of credit card fraud that you may not be familiar with of exploits merchants that offer cash refunds on credit transactions.
The practice involves getting a cash refund on a return and subsequently ‘charging back’ the purchase through their card issuing bank. Despite the refund, these chargeback requests are always honored by the bank because Visa and MasterCard strictly forbid cash refunds and therefore provide no protection to the merchant. So essentially you, the merchant, end up paying twice for the return, losing the value of the merchandise or service rendered, and paying for any chargeback or retrieval fees issued by your processor.
In the wise words of The Big Lebowski, “It’s a bummer, man.”
Protect Yourself
If you don’t already have a return policy posted you might consider doing that. You can even contact your credit card processor and request that a return policy be printed on your credit card receipt. A return policy can be as simple as, “No Refunds” or “Exchanges Only”.
No matter how your customer claims that they paid, if they don’t have a receipt you might allow an exchange, or you might strictly forbid recourse all together. It's your call.
