There are dozens of reasons for chargebacks. We all know about identity theft and fraudulent charges. Individuals steal others credit cards and make unauthorized purchases. The merchant has done his due diligence by verifying the CVV and received an authorization from the credit card company. It isn’t until he receives a chargeback 60 days later that he realizes there has been a problem. For all intents and purposes, his merchandise has been stolen from him. To add insult to injury, he has to pay a chargeback fee to learn about the incident.
Now we have the run-of-the-mill everyday chargebacks. These are the ones where the customer does admit he received the goods but for one reason or another the product was not what he expected, there was false advertising or statements, etc., etc. This is where chargeback insurance really comes in handy.
Like any other chargeback, the merchant is not notified until after the damage is done. With chargeback insurance the merchant is advised that the customer has a problem with his merchandise immediately. The merchant can perform due diligence and find out what the issue is. At this point he may decide to refund the purchase price to the customer – or tell him to take a hike. In the first scenario the merchant has been able to satisfy the customer and there is no chargeback to his account. In the second scenario the merchant takes a chargeback hit. The difference is that it was his decision and not someone else’s.
Having chargeback insurance helps mitigate fraud, avoid costly chargeback fees, fines and related operational expenses. If you have a high risk merchant account, this insurance can save you 30% or more in chargeback fees.
If you need a new high risk processor that offers this insurance, there is a processor who specializes in only high risk accounts. There is never an application fee or a set-up fee. Usually you can be approved within 48 hours. They also offer high volume solutions, load balancing gateways and multiple merchant identification numbers.