Everything You Need Know About Chargebacks, and How to Prevent Them

Apr 07, 2020

Chargebacks can quickly turn into a nightmare for business owners. A chargeback refers to the act of returning funds to a customer. The primary purpose of a chargeback is for consumer protection. However, this mechanism is often understood, misused and abused and can have a crippling effect on merchants.

A chargeback occurs when a cardholder requests that their bank reverse a credit card charge that was posted to their account. When a claim is filed, a nonrefundable fee (anywhere between $20 and $100 per chargeback) is then deducted from the merchant’s account. If a merchant has a business type or is part of an industry that experiences high chargeback rates, this can quickly add up and become a big problem.

Banks gauge a merchant’s risk and reliability on the number of chargebacks they receive,” Eaton-Cardone, co-founder and chief operating officer of Chargebacks911, told business.com.

Multiple chargebacks on a regular basis can lead to even greater merchant challenges down the road. Merchants are essentially ‘guilty until proven innocent.’ Chargeback fees and reimbursements are deducted from the merchant’s account automatically – no questions asked.”

Although there are many reasons why a customer might request a chargeback, these are some of the most common:

  • The customer did not receive the product or service
  • The description of the product or service was not accurate
  • The product was damaged or lost during shipping
  • Duplicate billing
  • Recurring billing was not canceled as requested
  • Technical error
  • Fraud

How to Prevent and Manage Chargebacks

The good news is that many chargeback scenarios – like lost or damaged products during shipping and billing errors – can be avoided by adopting good business practices and doing due diligence. Partnering with the right payment processing provider for your business type and industry is also key. If your business is considered high risk, traditional processors will turn you away. Thankfully, there are many high risk providers today that specialize in helping businesses secure safe payment processing services and prevent and manage chargebacks.

Before partnering with a provider, make sure you do your research. Is the provider reputable? What do the reviews say? Have other businesses considered high risk felt that the high risk provider understands the challenges they face? Do they offer a full suite of services and support?

The team at eMerchantbroker.com has created a system that helps you break the chargeback cycle and focus on running your business. EMB has partnered with Verifi and their new Cardholder Dispute Resolution Network (CDRN), as well as Ethoca’s alert system to give merchants direct control over resolving credit transaction disputes. By offering merchants both chargeback resolution networks, you can achieve the highest rate of chargeback resolution.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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