Why Chargeback Insurance is Becoming Essential for Merchants

Jun 23, 2015

Chargebacks can have a huge, negative impact on a business. Chargebacks occur when a customer files a dispute with their bank in regards to a debit or credit card transaction. The part about a dispute that makes a merchant helpless is when the customer fails to notify the merchant about the pending dispute; this is the case 58% of the time. The merchant is left in the dark and therefore unable to defend themselves against the initial chargeback.

When a chargeback takes places, the customer’s money is refunded, in some cases forcibly, by the issuing bank due to the problem with the transaction. While fraud can be the reason for a chargeback, a dispute over credit, repeat charges or a merchandise return can also be the reason. Chargeback fraud occurs when a customer purchases items over the internet using their card and then disputes it to have it refunded. Friendly fraud occurs when the customer intentionally initiates a chargeback even though they have already received the merchandise or services.

With more and more customers resorting to the internet to make their purchases, fraud is becoming more and more common. The cardholders themselves enjoy protection from their issuing banks. Merchants, on the other hand, are the most affected by this type of fraud. Merchants can be left without their merchandise that was purchased or without the money for that particular merchandise.

Merchants don’t have to be completely without protection. For merchants that have chargeback insurance, they can be reimbursed for the amount of fees and chargebacks that have been incurred by the bank handling their merchant account. Having this insurance involves paying a monthly premium.

For merchants that have a large number of their transactions occur over the telephone or internet, a chargeback insurance policy is a very good investment. It is very difficult to predict the frequency of these types of transactions, and therefore the number of times the merchant will experience fraud. This is the biggest reason why having chargeback insurance can be helpful in ensuring financial stability.

Don’t allow chargebacks to hurt your business’ revenue stream. Chargebacks can create up to 270% of a loss on a single chargeback. Having a chargeback “shield” can help you stop disputes. You will be notified quickly and be involved in the process – no more being left in the dark. Chargeback insurance has become an important tool in merchants’ plans to gain control of the quality of their business’ transactions.

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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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