Returned Payment

What is a returned payment?

A returned payment is a payment that fails to complete, returning to the sender. Checks bounce due to insufficient funds or closed accounts. ACH payments return for similar reasons or due to invalid account information. Credit card payments decline when cards are expired, overlimit, or flagged for fraud. Returned payments leave expected revenue uncollected and require follow-up.

Handling returned checks

When a customer's check bounces, your bank debits the amount from your account. Contact the customer immediately to arrange alternative payment. Assess any returned check fee permitted by your state. If the customer cannot pay, consider collection options. For repeat offenders, require cash, certified check, or credit card for future transactions.

Reducing returns

Verify customer information before accepting ACH payments. Use address verification and CVV matching for credit cards. Consider electronic check verification services that flag high-risk checks. For new customers, start with smaller credit limits or require advance payment. The cost of preventing bad payments is usually less than the cost of chasing returned payments.