The Inside Scoop on Chargeback Insurance

Apr 02, 2014

The bane of small businesses, particularly those in high-risk sectors, is excessive chargebacks. Chargebacks are like termites for merchants. They’re small, ever-present annoyances that can undermine the walls and floors of your business. Merchants may be familiar with chargeback insurance as a mechanism to cope with chargebacks. Yet, there are limits on the amount of damage insurance can prevent.

How Chargebacks Hurt your Business

Chargebacks can be the product of both fraudsters and legitimate customers. Customers that produce addresses or personal information that doesn’t match the system can cause a chargeback as well as those returning products. More deliberate scammers may use fraudulent tactics to take advantage of chargebacks as well.

In the best-case scenario, you’re wasting time dealing with chargebacks and wasting money paying fees. Worst case scenario you wind up on a Terminated Merchant File (TMF) list that prevents you from processing credit and debit cards.

Chargeback Insurance and How it Helps

Chargeback insurance helps merchants whether the penalties imposed by chargebacks. It is like other forms of insurance—protecting you from unforeseen circumstances. There are several beneficial areas that chargeback insurance covers. For example, you can use your policy to recover losses from counterfeit credit cards used by scammers. The insurance will also cover “ship to” changes in the address that occur post-purchase. Finally, if there’s a signature mismatch when the customer signs at point-of-sale the insurance will kick in and cover your chargeback loss.

Where Insurance Falls Short

Having a chargeback insurance policy may seem like an effective countermeasure. It will help you protect your bottom line—but to a limited degree. This is not blanket protection, there will still be areas where you are unprotected by chargeback insurance. Chargeback insurance will not protect you from “undelivered purchase” scams and “poor quality” complaints that result in chargebacks.

The greatest shortcoming of chargeback insurance is that it will not reduce your chargeback ratio. A poor ratio of chargebacks can lead to banks refusing to process your credit card transactions. It can also have a long-term impact on opening new merchant accounts and escalating fees.

Alternative to Insurance – EMB Chargeback Shield

If you are looking for a more comprehensive and effective solution to a high chargeback rate and ratio, eMerchantBroker’s new Chargeback Shield may be the best answer for your business. The Chargeback Shield brings you, the merchant, back into the loop when a chargeback occurs. As soon as a credit card company receives notification the Chargeback Shield acts and gives you the option of accepting or refusing the chargeback.

This approach to chargebacks means you can help reduce chargebacks as they are occurring. You aren’t looking for compensation but rather prevention. The Chargeback Shield utilizes a network that’s already in place between banks and credit card processors and simply brings you back into the chargeback fold.

For more information, contact us today at 818-621-4893.

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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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