Merchants Must Protect Themselves with Chargeback Insurance

Dec 15, 2014

“Friendly fraud” has plagued retailers and credit card providers for the last few years. But it seems that only the most extreme cases receive any attention from the general public and even small merchants. For example, the recent hacks of Target and Neiman Marcus made headlines for months in the United States and bank officials, credit card distributors, and even the government vowed to put an end to consumer fraud. In fact, the United States is currently undergoing a major shift in credit card technology, as merchants and card providers prepare for the shift from data strips to EMV chips.

But who is monitoring the small instances of fraud conducted mostly by consumers themselves that occur every day, slowly chipping away at the profits of small merchants? In the interest of merchant security, here are the U.S. cities with the highest rates of chargebacks.

Show Low, Arizona has the highest rate of chargebacks (2.2%), followed by Port Washington, N.Y (1.75),  San Jose, Calif., Miami, FL, and Astoria, N.Y. (all 3 at 1.4%), and Miami. High chargeback rates were also found in notable cities like Chicago (1.4%), Los Angeles (1.3%), North Hollywood (1.3%), and Houston (1.3%).

According to a 2013 chargeback study, chargebacks occur for the following reasons: identity theft, failure to receive a good or service as specified, and pricing errors. But they can also occur because of “friendly fraud.” Friendly fraud happens when a consumer makes a purchase, receives the goods then files a chargeback in hopes of obtaining an unwarranted refund. Unjustified chargebacks can be devastating to online merchants, as often times they are not even aware that the chargeback has happened until it is too late. Plus chargebacks also come with additional fees that merchants must pay.

Online merchants must protect themselves against chargebacks with comprehensive, fair chargeback insurance. Find out more about eMerchantBroker Chargeback Suite 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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