What is a chargeback? – The Thing You May Not Know, That You Actually Need

Apr 14, 2015

If you have a merchant account, whether high risk or conventional, one operating feature that puts fear in everyone is the chargeback. Credit card processors can base your success or failure on your chargeback ratio. Too many means they cannot count on your company’s revenue because they are never sure who will accept the billing and who will reject it. Too many may raise a red flag that you are participating in bait and switch or that you are deliberately falsifying claims about your product. If you are doing everything in your power to stay above board with your chargebacks and they still frequently occur, you definitely need chargeback insurance.

Even if you remain below the 3% ratio level a chargeback can eat into hard-earned profits. According to experts, chargebacks can create up to 270% of lost money. This means if your business suffers a $100 chargeback you may wind up paying $270 in fees. Adding to this loss of money, 58 % of the time the merchant is never notified of the pending dispute, making them helpless and unable to defend themselves against the initial chargeback. It doesn’t seem quite fair. It isn’t. Chargeback insurance levels the playing field.

In a normal day a customer orders an item from your on-line store. He charges it and when the sales is processed the card issuer gives an approval. You think all is good until 60 days has passed and you get notification that the sale is charged back for one of many reasons: the customer said it was not what he ordered; the customer said he didn’t like the material; the customer said he didn’t make the charge. By this time the card issuer has withdrawn the money from your settlement plus added on fees. To add insult to injury, the customer kept the product and it is no longer in inventory. You cannot re-sell it.

EMB has teamed up with Verifi and their new Cardholder Dispute Resolution Network (CDRN), as well as Ethoca’s alert system. With this partnership any time there is an issue with something being charged back, instead of going to the card issuer it is diverted to the merchant. You are now in control. You are able to contact the customer to see if there is a happy resolution to the problem. Can you ship a different product – maybe a different size or color?

One big reason for chargebacks is that the customer does not recognize the company on his billing statement. He bought a candle from Candles R Us but the corporate name of Acme, Inc. is listed on his bill.  He did not buy anything from Acme. All it takes is a simple phone call to inform the customer that he made the purchase from the on-line store and the corporate name is on his bill. Without chargeback insurance, the merchant did not have the opportunity to save the sale. Then again, the customer may not like the item. He is instructed to return it for a full refund and you issue a pre-paid packing slip so he does not have to pay for shipment. You are able to issue a refund rather than have the item charged back. Refunds do not hit your chargeback ratio.

Protect your company profits with chargeback insurance. Contact EMB 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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