What Does Deposited Item Chargeback Mean on a Bank Statement?
When a bank statement lists a deposited item chargeback, it means that one item that the account holder deposited into the bank was returned unpaid by the drawee bank or that the drawer canceled the transaction. Banks can chargeback deposits made into both business and consumer accounts. Some chargebacks occur due to processing errors, while others are related to fraud.
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Types of Chargebacks
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Business customers often have chargeback deposit items because consumers file disputes with their own banks stating that charges made to their debit or credit cards were unauthorized or fraudulent. The business's own bank debits its account for the amount of the disputed charge and refunds the other party's account. Checks returned due to the drawer having insufficient funds show up on a payee's bank account as chargeback items, as do misdirected direct deposits. Some people mistakenly believe that they can keep money that was erroneously deposited into their accounts, but banks simply chargeback the deposits when the errors are discovered.
Financial Implications of Chargebacks
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Most banks assess a chargeback fee for every returned deposited item. The fees normally range between $7 and $10. Additionally, banks debit the account for the amount of the returned item, which in turn may lead to the account going into the negative. If any items clear an account with a negative balance, the bank can charge an overdraft or non-sufficient funds fee. These fees often exceed $30 and are assessed on a per-item basis.
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Time Frames
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The Federal Reserve's Regulation CC outlines out the maximum time frames that banks can hold deposited checks for. The hold times are designed to give banks enough time to send deposited checks to the nearest Federal Reserve and for the Reserve to send them on to the drawee bank. The drawee bank pays the check or declines it and sends it back to the payee's bank via the Federal Reserve. Generally, this process takes up to seven business days, but misrouted checks can take longer to process. Most hold times expire after seven business days even if the funds have not yet been collected. Some chargebacks occur after check hold times expire.
Chargeback Prevention
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Individuals receiving checks can cash them at the drawee bank to avoid the risk of having the item returned unpaid. Business customers cannot cash checks, but may exchange them at the drawee bank for cashiers' checks. To avoid chargebacks on debit and credit card deposits, businesses should keep records of all signed customer receipts. Many businesses also require sales associates to record driver's license information to help prevent fraud or unfounded customer disputes.
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