Hello everyone,

my company is currently evaluating the possibility to switch from our current third party payment processor to a merchant account/payment gateway solution. We're based in Germany and are selling online game subscriptions (not gambling!) mainly over credit cards. We're counting more than 10.000 CC transactions per month. Our current payment service provider is pretty expensive and is not willing to help us lower the processing fees in any way.

Therefore we're looking for an appropriate CC merchant account. The problem is, that our chargeback rate lies between 1% and 2% on average, which has never been a problem to us. However the merchant account contracts we've seen so far all require chargeback rates below 1% which are almost impossible to guarantee.

Looking at the number of 10.000 transactions, a 1% CB-rate means 100 chargebacks per month. We can struggle to get the rate to say 0,8% creating a "buffer" of 20 chargebacks per month. But this is like nothing! A single criminal kid with a bunch of stolen credit card numbers can easily trigger 20 chargebacks and push us above the 1% limit.

So my question is, are there institutes offering merchant accounts allowing chargeback rates of up to 2%? Any suggestions?

Thank you for any advice you might share,
Steve

Most Merchant Account provider allow 1,5% for Visa and 2% for Mastercard pr. month.

Im not sure if that help you much, anyway there are a few MAP's on this board that will be able to help you.

Originally posted by trinitron
Most Merchant Account provider allow 1,5% for Visa and 2% for Mastercard pr. month.

I really hope so. Offers from solid (!) MA providers are welcome.

All offers for so called "high risk" merchant accounts I found so far have been more or less obviously scam.

the merchant account contracts we've seen so far all require chargeback rates below 1%That is what I know too, but for your good I hope there are some that allow 1.5% or 2% as triniton said.

I don't know any that will grant you a merchant account with 2%chargebacks, but from what I know, and it might save you some time, NOVA, National Processing Company and Wells Fargo will not be easy to convince.

Best of luck! As you said, maybe some merchant accounts providers can come in and help you some more.

you count chargebacks not correctly.
you must take them as chargebacks amount / processed amount
but 100 chargebacks are too high for a single month for a single merchant account. I think only 3PP will be helpful for you.

Hi Steve,

Here is a suggestion for you on another possibility that might
work. I don't yet know enough about the full details on your business model to be sure but figured I would toss this out there.

If the fraud that takes place on your subscriptions mostly happens during initial orders that are charged back within a relatively short period AND if you have a "stable" customer base of "lower risk" transactions that have renewed for a number of months without incident - you could possibly have Merchant Account A for New Orders and then migrate your transactions to Merchant Account B for Stable Recurrings at a lower cost.

In other words, you pay a premium to a 3PP for the initial orders but then migrate the good legit accounts to a direct merchant account at a preset interval and handle those in-house at a lower cost.

There is a lot of logistics behind this and it may or may not be feasible depending on what you could work out with your 3PP.

Also - you mention that you are based in Germany, but would there any possibility of setting up a U.S. subsidiary with a U.S. bank account and signer? As a "Merchant Account B" option, that would likely be the least expensive solution.

In the U.S., Visa and MasterCard do mandate thresholds of 1-2.5% depending on the means by which the chargebacks are measured (i.e. cback vol / Interchange vol or cback # / trans #) and there is a 100 chargeback/sale and 25 chargeback/sale threshold, respectively.

So while I do not think you'll find any merchant agreement that has a figure much higher than 1.00% in the fine print - the practical management of any merchant account on the risk-level is primarily at the discretion of the merchant services provider.

Hope that info is helpful! :)

If the fraud that takes place on your subscriptions mostly happens during initial orders that are charged back within a relatively short period AND if you have a "stable" customer base of "lower risk" transactions that have renewed for a number of months without incident - you could possibly have Merchant Account A for New Orders and then migrate your transactions to Merchant Account B for Stable Recurrings at a lower cost.

This is a good strategy to consider. I have a customer that uses this method (its actually the reverse for him, re-bills are more problematic) to manage chargebacks.

the practical management of any merchant account on the risk-level is primarily at the discretion of the merchant services provider.

This is a key point. There are providers that will allow chargebacks to be over 1% of sales volume per month, but they are not out there saying it, because they don't want to give people the idea that they can go hog wild on chargebacks. Running month in and month out over 1% AND getting chargebacks on a daily basis can be problematic for the underwriting bank because it can draw the scrutiny of the Card Associations. If chargebacks are going over 1% on occasion, or even every other month, and the merchant is having no problem covering them, and all the other risk factors are good, then there are processors that will allow it.