What You Don’t Know May Be Hurting You | What is a chargeback? A Detailed Explanation

Jul 20, 2015

If you have already got yourself an e-merchant account that allows you to accept credit cards for payments, then that’s a big step forward. With your new account, you can safely and conveniently go about online transactions in a cost-effective and professional manner. But there is probably one more thing to consider – reducing your chargebacks!

So, what is a chargeback?

Basically, a cardholder receives their credit cards from banks. The bank from which the card is obtained is typically called the “issuing bank.” A chargeback simply refers to a form of customer protection provided by the issuing bank. This protection allows a cardholder to file a complaint in the event of a fraudulent transaction on their statement. As soon as the aggrieved customer files such a complaint, the involved bank will swiftly move to investigate the contested transaction.

If the transaction is indeed proved to be fraudulent, the bank has the authority to return the original value to the customer. Try to look at it from the merchant’s point of view. A customer comes in and you provide him or her with certain services.  The customer then makes a payment using a credit card. Later, the transaction is deemed fraudulent and what follows is that the customer’s bank takes back the entire value of the transaction from your account, plus a small fee. You realize that as the seller, you don’t only lose the value of the services or products offered but also the fee incurred for payment processing, currency conversion commissions, and the chargeback penalty (chargeback penalties range from $0 to $100 depending on who you bank with).

On the other side, if the cardholder’s claims are proved to be true, additional processing fees may be charged but no refunds will be made.

A good idea, in addition to applying for chargeback protection, is to avoid chargebacks whenever possible. Not only are they costly to the business but merchant accounts that attract too many chargebacks may be labeled as “risky” by credit card companies. This can severely damage the image of your business. Moreover, “risky” accounts often attract higher commissions. That’s why every merchant strives to avoid being labeled risky.

While it may be extremely difficult to completely avoid chargebacks, there are always things you can do to keep your business safe. An excellent idea that has proved beneficial to most e-merchants is to understand your industry better. This should allow you to stop fraudulent transactions before they happen.

Let us help you get a high risk merchant account 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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