Tuesday, May 26, 2009

Is there an alternate meaning of "Exchange" I'm not aware of?

A few times recently I've gone to return an item to a store and been faced with a "new policy" in regards to exchange. When you aren't exchanging for exactly the same item - which I thought would be a substitution, not an exchange - and you paid in the first place via Credit Card (Or Visa Debit), the store insists on refunding the original amount of the item back to the card and then recharging the card for the cost of the new item.

I have a few issues with this. Firstly, that's a refund with a subsequent purchase, not an exchange. Why call it an exchange policy if it doesn't do what it's called?

Secondly, if I use a Visa Debit card, I may not have sufficient funds in the account at that moment to cover the cost of the subsequent purchase. I, like most people, have several accounts, and I move money around depending on what I'm doing with it, and might use a card for a purchase one day that wouldn't have the funds a few days later when I need to take the item back. The refund to the debit card takes three days, so I would be forced to either find an alternate means of payment on the spot, or come back in three business days to complete what should be a simple process.

Thirdly, if the card I'm using is a Credit Card and I don't have an interest-free period, I'll be paying interest on both purchases for those three days it takes the refund to get back onto the card.

If I use cash, you don't give me back the cash for the original purchase, then make me hand it back again for the exchanged item, do you?

I've asked at the stores - not making a complaint, which isn't fair considering the shop-assistants aren't the ones setting this policy - what the policy is designed for, and was told that "too many people were returning things that had been bought on cards". I asked why that was a problem, and was referred to the Exchange Policy of that particular store. It mentioned nothing about it.

Has anyone else had this experience, and can anyone tell me why it's such an issue? Having worked at the other end of the line, I know it isn't that hard to reconcile a refund in cash with a purchase on card as long as sufficiently detailed records are kept. I can't imagine it being too onerous to keep track of the exchanged items either, considering paperwork is filled out detailing exactly that. Is it laziness? Or just a way of trying to limit the number of people returning goods?


Captain Suburbia said...

My understanding of this is that it's due to the commission charging system.

Say you bought an item for $100. The shop doesn't get the whole $100, the commission is deducted and they get, let's say, $98. So if they give you $100 cash,or Store Credit, or whatever, they're $2 in the hole, but if they reverse the original transaction it's all as if it never happened. You get your $100 back and the store gives back their $98. Sounds like a pissy amount, but add it up over time for a large chain department store and it probably works out to be quite a bit.

Someone probably figured out how much it cost them every year and BLAMMO! new policy to take effect immediately!

PS: of course I have no primary source for this. It's just what someone at work told me (and no, I don't work at a chain department store).

jamesm said...

On the other hand CS it sounds a bit odd to me.

A refund on a card (sometimes called a recharge) is something the shop definitely doesn't want because:-

a.) they have to pay a fee for it anyway

b.) if they have too many recharges their merchant fees go up to the point where they can lose their contract

This second one can happen pretty fast because it is a condition enforced by the card companies (Visa/Mastercard) on the issuers (ie. banks) in the first place and then on the stores.

A major bank explained this to me during commercial negotiations a few years ago. The gist is that a "high" level of recharge attracts penalty charges that escalate exponentially, so much so that it would be possible to render the bank's entire card operation unprofitable within a matter of months if it wasn't dealt with.

The guy went on to explain that the bank would therefore have to be very sure that the company I was working for at the time (this was an internet startup operation) had quite strong credit controls in place before they'd contemplate taking us on as a merchant.