Visa’s Chargeback Rules Changing…

Dec 15, 2016

Chargebacks have always been a big issue for payment processors, which is why Visa has a strict program in place to help tame the vice. Be prepared for even tougher times. With chargeback rates on the rise, Visa, in their latest update to the chargeback program, is adding an even stricter layer of rules to curb the trend.

First, it’s important to understand where exactly we’re coming from. At the beginning of this year, and for the many years before that, online merchants were not allowed to report more than 100 chargebacks in a month. Also, the chargebacks were not supposed to account for more than one percent of your sales.

If both of these happened, you would be put on a Visa Monitoring Program. Merchants on the chargeback monitoring program have to show Visa a plan for getting their high chargeback numbers back down, while facing fines and extra fees. But that is just the start. If after 90 days your numbers were still high, you can be declared “high risk” and risk losing your merchant account.

Pay special attention to the “both” in the above rule. You have to breach both regulations to face punishment. In other words, you can get away with more than 100 chargebacks in a month as long as the chargebacks don’t constitute more than one percent of your sales. You are also safe if the chargebacks account for over one percent of your sales but don’t exceed 100 in number.

The New Rules are Tighter

In addition to the Chargeback Monitoring Program, Visa has introduced a new Pre-monitoring Program. The pre-monitoring program has a threshold of 75 chargebacks and 0.75 percent. If you hit this threshold, you will get a stern warning, although there will be no fines and fees yet.

What’s the big deal? One would ask.

The answer is simple. Currently, the average chargeback rate for online merchants is 0.85 percent. This means that the average merchant would have escaped the earlier one percent rule. But with the limit dropping to 0.75 percent, a 0.85 percent chargeback rate would get you in the bad books of Visa. In other words, average performance is no longer good enough.

What’s more, Visa’s U.S. and European operations are scheduled to merge soon. Currently, European Visa has a threshold of 150 chargebacks and 1.5 percent for one to get in trouble. When the merger finally happens, it is expected that European merchants may have to adjust to the new stricter rules of U.S. Visa.

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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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