A Question For Web Hosts Who Use Credit Card Processing
Maybe a web host out their who currently has a merchant account can help me out. Our company is growing very quickly, and up until now, we have been soley using Paypal as a payment method. I don't know how many of you are familiar with the absolute horror stories you hear happening to Paypal merchants (http://paypalsucks.com as an example), but I feel it is time to look at alternative payment methods.
As most of you know, there is always the occasional customer, who instead of coming to you first regarding a refund or related issue, simply reports the issue to Paypal. Now, I know that a merchant account is different than Paypal, but how does this process work with credit cards?
I was interested how this worked, so I spoke to a company that offers merchant accounts. I was told that they have to comply with Visa's terms, which states that if more than 1% of your transactions are reversed or fraudulent for 3 months in a row, they have the right to terminate your account and report you to Visa.
We currently have about 50 clients. In my experience, I know that there is always a decent amount of fraud that goes on, along with the occasional reversal etc. So if it is 1% of approximately 50 clients, does this mean that if one client makes a reversal once a month for three months, that's the end of it? We're done? I know that some of the larger web hosting companies must have many reversals every month.. so how can this be true?
Thank you for reading all of this. Any advice on this matter would be greatly appreciated.
I havenít had a reversal in 4 years, and that was some guy trying to use a large purchase as a tax break then return it after the new year, his reversal failed as we had done everything correctly. If you communicate with your clients to bring any concerns to you first you should never have a reversal.
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Provided you will be verifying your orders in advance of any card processing you should be fine with doing credit card payments. Presently we run an authorize.net gateway merchant account and have not had a single problem or reversal to date (only had this a few months as initially we only accepted paypal). It is all a matter of communication with clients as well as being cautious and thorough in the verification of new orders.
Question: I am not sure how this all works, but lets say a dispute arose, or a fraudulent transaction, or a reversal. Do you have a chance to ammend the situation in all these cases, without the issue affecting your merchant account? More information would be appreciated.
It won't save you from chargebacks from legitimate card holders but it does reduce fraudulent transactions, as most scamsters don't want to speak over the phone with you.
Many merchants receive chargebacks due to accepting an unauthorized card. The original owner sees the charge and claims a chargeback.
We had a particular account sign up once. When we researched the name and address (as we do on all orders) we obtained a phone number for the person the card belonged to. The person had no clue his card was being used by an unauthorized party. The card was still in his pocket. The scammer was using his name, address and credit card number.
He thanked us for verifying the charge and confirmed he did not place the order. That would have been a chargeback fir us.
The only way I know of to avoid a chargeback after it is claimed is by having a signed credit card authorization on file. Even then, it isn't fool proof.
In two years we've only had one legitimate customer do a chargeback on us. It was his mistake, he didn't recognize the name of our company which is different than our website. He paid quarterly and when he got his bill 3 months later he disputed it. Because we are internet only we are treated different than brick-and-mortar companies. Our merchant bank immediately charges back any dispute immediately and then charges us $35 on top of that.
We've had a few frauds, that's where the real risk is. We now (for almost a year) call every customer, even in other countries. If the phone number is good, it isn't fraud.
If you get canceled by your merchant they can "black-list" you and make it extremely hard to get another account with any other merchant.
Don't focus on your legit customers, if you give them what you promise, you won't have to worry about chargebacks from them. Worry about the fraudsters.