Many calling card business owners are surprised to learn that their business is considered high risk, traditional merchant service providers usually characterize prepaid calling card companies high risk because of the higher percentage of chargebacks.
The prepaid phone card industry generated $296 million and 6.9 billion cards were manufactured, according to the International Card Manufacturers Association (ICMA), a global trade association for card manufacturers, personalizers, issuers and supplier, 2015 Global Card Market and Personalization and Fulfillment Statistics Report.
It’s no surprise prepaid calling card companies have gotten so popular since it gives people an easy way to make long distance calls without having any unpredictable phone bills. They also are alternatives for people who can’t make cheaper calls using their home internet connections.
Though competitive with lots of revenue potential, the prepaid calling card industry is associated with fraudulent and unsuccessful transactions.” Since these products generate more customer disputes and chargebacks than other businesses, banks label prepaid calling card merchants as “high risk.” Merchants that want to operate an e-commerce must be able to process credit card payments. To process credit card payments, a business must obtain a prepaid calling card merchant account. When businesses are turned away by traditional lending institutions, they can apply to high-risk credit card processor, eMerchantBroker.com (EMB) for a prepaid calling card merchant account.
Within 24 and 48 hours, EMB will approve accounts for eligible merchants. Additionally, EMB offers chargeback management tools, payment gateways, and fraud filters. EMB offers the support, tools, and knowledge prepaid calling card businesses need to successfully process credit card payments. Additionally, EMB offers guidance on the creation of refund, return, and order cancellation policies. Apply now using EMB’s easy online application.
Prepaid calling card merchant account application requisites
Businesses can apply online now for a prepaid calling card merchant account by filling out EMB’s simple online application. To apply, merchants will need to submit the following items to processors and underwriters:
- A valid, government-issued ID, such as a driver’s license
- A bank letter or a pre-printed voided check
- Three months of the most recent bank statements
- Three months of the most recent processing statements, if applicable
- A SSN (Social Security Number) or EIN (Employer Identification Number)
- Chargeback ratios must be under 2%
- A secure, fully-operational website
Though EMB cannot guarantee to approve any merchant account, it does promise a fast, streamlined application process. EMB prides itself on making it easy to help find payment solutions for businesses of all sizes and backgrounds. Apply today and get approved within 24 hours.
Underwriter review of a prepaid calling card merchant account application
Underwriters are responsible for assessing risk. During reviews, they thoroughly review applicants to ensure they are operating responsible, legal businesses. Merchants can prove they are operating legally by giving underwriters valid disclosures and restrictions that help support their claims.
During an application for a prepaid calling card merchant account, underwriters work to ensure that merchants are following all applicable laws. Also, they review merchants’ credit scores, credit card processing history, bank statements, and its website. When checking a website, an underwriter will make sure that is has clear, prominently-displayed privacy and refund policies, as well as a secure (SSL). Negative bank account balances, unpaid bills and late payments, and a history of excessive chargebacks make a merchant a riskier applicant.
Prior to going before an underwriter, a merchant should have no outstanding debts, some money in the bank, and the person applying for the account should have an exemplary credit history. Taking a proactive approach will increases a merchant’s chances of getting approved for a prepaid calling card high risk merchant account without any limits, such as higher processing volume caps or lowering rolling reserves.
Get credit processing volumes raised for prepaid calling card merchant accounts
Due to fraud and other risks associated with the nature of these businesses, many are given caps on the number of credit card transactions they can process each month. Once merchants hit their caps, they cannot take any more credit cards purchases, essentially keeping them from doing any other business for that month.
Prepaid calling card merchants that can prove they pay their bills, have low chargeback ratios, and have saved some money, don’t have to get stuck with caps forever. Successful merchants that need higher volumes can request new caps in as few as three months.
Chargeback ratios ring high in prepaid phone industry
When customers buy prepaid phone cards, they are paying in advance for telephone calling time. Cards cost between $2 and $20 and allow caller to make local or long-distance calls with rates charged per minute. Though they are convenient, some prepaid phone cards have hidden costs or other problems, like bad connections, access numbers that are almost always busy, and personal identification numbers (PINs) that don’t work, according to the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC). These reasons are why prepaid calling card merchants are vulnerable to excessive chargebacks.
Also, there are plenty of clients who have valid transaction complaints but don’t know how to resolve them. Those who do call to complain often get frustrated and hang up if the call or problem isn’t handled quickly or they get a business representative who has no customer service skills. This will trigger a displeased customer to contact their credit card companies and dispute transactions.
A lack of electronic or paper receipts is another problem that leads to chargebacks. When clients don’t have receipts, they don’t have quick access to a retailer’s contact information. There also is a good chance that clients forget they purchased call cards or don’t recognize the business name attached to the charge on their credit card statements.
A number of prepaid calling card companies are small and have not had the time to build up good reputations. Startups and less-known businesses don’t have the business savvy and customer service skills needed to handle customer complaints. They likely do not offer 24-hour customer support or know to offer refunds to prevent customers from disputing a credit card transaction.
Many businesses don’t realize that their chargeback ratios, whether they are won or lost, contribute to their ability to operate a business until it is too late. Excessive chargebacks can lead to a terminated merchant account and make it more difficult for them to get approved for another in the future.
Too many chargebacks equal high fines for credit card processors
When high-risk merchants have excessive chargeback ratios, credit card processors can get slammed thousands of dollars in fines for each merchant account. Credit card brands, such as MasterCard, can fine the processor that provided the prepaid calling card high risk merchant account whenever a business exceeds a 2% chargeback ratio.
Penalties get steeper if a chargeback ratio doesn’t drop back down. Unfortunately, processors are often not able to collect chargeback fees from merchants because many go under or vanish long before chargebacks are initiated. Some chargebacks are initiated six months after a purchase date.
Since the costly fines cut into their profit margins, credit card processors have no choice but to shut down high-risk merchant accounts with chargeback ratios of 3% or more.
The chargeback ratio of a prepaid calling card merchant is calculated by the number of transactions divided by its number of monthly transactions. Therefore, if a merchant has 100 transactions and four chargebacks in a month, the business has a 4% chargeback. The actual dollar amount of a chargeback doesn’t matter to credit card brands or processors.
With so little room for errors, merchants must try to keep their transactions volumes high and take actions to avoid chargebacks.
Simple ways to maintain good chargeback ratios
In this industry, fraud and displeased customers are the main reasons for excessive chargebacks. Unfortunately, the reasons for the chargebacks are never a concern for processors or credit card companies. Though many dissatisfied clients likely means a merchant has a flawed business model, the only thing processors credit card brands care about are chargeback ratios higher than 2%.
The best way to keep chargebacks low is to offer clients full refunds. In the end, merchants learn that refunds are much more cost-effective than chargebacks. When a dissatisfied customer contacts a merchant, the customer service representative should be trained to immediately offer a full refund instead of explaining the charge and the terms of the transaction. Taking these steps to resolve the dispute amicably removes the chargeback potential of the disputed transaction.
Since high chargeback ratios are often due to something as simple as customers not remembering or recognizing transactions on their credit card statements, merchants are encouraged to use clear billing descriptions on their websites and all correspondence. The descriptor should include the merchant’s name, email, contact number, any other pertinent information.
A business that is transparent, answers customers’ questions, and acts promptly resolve issues will be noticed for their good customer service. Prepaid calling card businesses that are easy to deal with and openly communicate with customers will keep their chargeback ratios down.
A mitigation program prevents chargebacks
Since processors can terminate prepaid calling card high risk merchant account that don’t maintain chargeback ratios below 2%, merchants are putting their businesses in jeopardy if they don’t work to prevent chargebacks. A quick way to shave down chargebacks by 25% is to use a mitigation program, like the one offered by EMB. A merchant can prevent three out of every 12 potential chargebacks by using a mitigation program.
EMB’s program is perfect for high-risk merchants, such as prepaid calling card businesses. To create the program, EMB partnered with Verifi and its new Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system. The program is unique because CDRN works with card issuers and banks, which allows businesses to resolve credit card transaction disputes directly. Implementing the system allows merchants to achieve the highest rates of chargeback resolutions in the most efficient ways.
Use these Prepaid Calling Card Categories
Federal statistical agencies classify establishments uses a list of six-digit numerical codes known as the Northern American Classification System (NAICS). The data is used to collect, analyze, and publish statistical information about similar types of businesses. Also, it is used to determine the way they impact the economy in the U.S.
Prepaid calling card merchants often use the following NAICS codes:
- 517210: Wireless Telecommunication Carriers, Except Satellite
- 517911: Telecommunications Resellers
- 517919: All Other Telecommunications
- 541990: All Other Professional, Scientific, and Technical Services
- 522210: Credit Card Issuing
Visit the United States Census Bureau’s Northern American Classification System to view the complete NAICS code list.
The four-digit numerical Standard Industrial Classification (SIC) codes are used to identify the main purposes of businesses. They are assigned by the United States and other countries.
Businesses in the prepaid calling card industry exclusively use these SIC codes:
- 4813: Telephone Communications, Except Radiotelephone
- 8999: Services, Not Elsewhere Classified
Visit the United States Department of Labor to view a complete SIC list.
Prepaid Calling Card Merchant Processing with eMerchantBroker.com
Our team at eMerchantBroker understands the importance of getting electronic payment processing operational for your prepaid calling card business. We can find the perfect merchant account for your business. If you can manage your chargebacks and disputes efficiently to maintain a rate under 3% on your electronic transactions we can get your merchant account set up in as little as 3 days.
Waste no time finding the perfect merchant service provider at eMerchantBroker. Find the lowest rates for your merchant account with our fair Competitive rates. We can have your company approved for a merchant account in as little as 48 hours