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Avoiding the Dreaded ChargebackA chargeback is a request by a credit card holder to reverse charges placed on her credit card.
This is a huge issue in getting an inexpensive merchant account. You will pay a penalty fee for the charge, and if you get too many, your account will be suspended. Friendly(?)In addition to fraud perpetrated by thieves, there is also so-called "friendly fraud" which takes the form of customers who claim they didn't purchase from you--even when they know they did.(Just so you're aware, there are often much more colorful terms applied to this act, but "friendly fraud" will do for our purposes. ;-) Unfortunately, you, the merchant, ultimately must bear the brunt of these actions ... ... You are responsible for reimbursing the purchase price to the consumer. ... You also incur a fee for the chargeback. ... And, if it occurs too often, you could have your merchant account revoked. (stop me when this starts to sound unfair!) Banks
and providers will use the application process to evaluate your
ability to absorb these charges since they get stuck with
the bill if you
default. But not all such actions by customers are malicious in nature. Many times card holders dispute a charge for one of the 3D's:
CountermeasuresLet's start with honest chargebacks.There are 3 things that you must make clear to your customers which can drastically reduce your chargeback rate.
And when it comes to dropped orders and defective merchandise, keep a close eye on the percentages. Depending on volume, anything over 2-3% and it may be time to start shopping for a new fulfillment house. FraudIt happens and it happens a lot. But can you do anything to counteract it?The best thing you can do to reduce fraud-related charges (and something an alarming number of merchants don't do) is thoroughly check the reputation, competence, and track record of any payment processing company you are considering. Many services simply do not address fraud and security issues adequately. Also remember that any online merchant can be a victim of fraud - not just those selling high priced items. To avoid chargebacks, all merchants must endeavor to AUTHENTICATE credit card orders. For most merchants, I recommend using an address verification service. Many providers bundle address verification and fraud screening software with their service. Will
you reject all
incorrect
addresses? Will you accept partial
address verification? That's up to you. You decide what you're policy
will be. Address verification is usually enough. However, high value items will require greater efforts of authentication. While there are many methods of manual authentication, simply asking for both a work and home number and then calling to verify the order is the easiest (and probably most effective) solution. Of course, this is only feasible if you sell a small volume (but if your product is expensive, each chargeback is more costly and worth extra effort). While there are many other options and services, these 2 simple efforts will be enough for most merchants to significantly lower chargebacks (don't dream you'll ever get rid of them completely though - that's like expecting world peace!). Ultimately, while debate continues on just how big a problem online fraud really is, merchants must be practical and take whatever measures are reasonable.
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What is inexpensive?!An inexpensive merchant account is...
Competitive pricing:*internet/mail/phone2.25% discount rate 25 cent transaction fee Retail (face-to-face) 1.85% discount rate 25 cent transaction fee Gateway fee $17 month Statement/service fee $10 month If you are considering several merchant accounts and the prices are in this range, stop using price to compare. It's time to compare service, support, features, etc. Look beyond price.
*These rates are taken from Charge.com.
Thank you thank you thank you!This site is just what the doctor ordered. Thanks for keeping me from makeing [sic] a big mistake! James Adair, |
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