Tag: chargeback management

What is a Chargeback Fee?

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Chargebacks are a significant issue for high-risk businesses.

A single chargeback can cost you time, money, and energy you don’t want to spend. Not to mention that it can often lead to frozen merchant bank accounts or closures—causing significant administrative burdens for your business.

Merchants must understand what chargeback fees are, what causes them, and the steps to minimize losses incurred.

This article will discuss all you need to know about chargeback fees, the different types of chargebacks, and how to prevent them from occurring in the first place.

What Are Chargeback Fees and How Do They Work?

A chargeback fee is a penalty or fee imposed by credit card companies on merchants who process transactions that are eventually deemed fraudulent.

According to a TransUnion report, an alarming 25% surge in online fraud attempts has been recorded across the US.

Chargeback fees are a significant issue for e-commerce businesses as they can significantly reduce profits and cause unnecessary headaches.

The chargeback process starts when a customer disputes a transaction with their credit card issuer, requesting a refund. This is known as a chargeback request.

Once this happens, the merchant loses any money earned from that sale and is assessed a chargeback fee.

Different Types of Chargebacks

Chargebacks come in several forms, including friendly fraud, true fraud, merchant errors, and authorization discrepancies.

Friendly chargeback fraud occurs when customers reverse charges due to buyer’s remorse or misunderstanding about what they purchased.
True fraud is when someone steals another person’s credit card information or uses false information while purchasing without authorization from either party.
Merchant errors involve incorrect billing information or mistakes made during shipping orders.
Authorization discrepancies occur when there is a difference between what was authorized by the issuing bank and what was charged by the merchant.

Types of Fees Included in a Chargeback

The chargeback cost is typically composed of the following: a transaction fee, an acquiring bank fee, marketing and acquisition fees, and business operating expenses.

Transaction Fees

This is the fee typically charged by the merchant’s payment processor for executing the transaction. These fees are not refundable. Pricing varies depending on the card network and the country in which it was issued.

Typically, transaction fees range from 0-5% of revenues.

Acquiring Bank Fee

This is a fee set by the credit card company that must be paid to them for each chargeback issued. These processing fees vary depending on the card used and can range from a few dollars to hundreds of dollars per transaction.

Business Operation Expenses

This is the cost associated with fulfilling and delivering the product or service to the customer—including packing, shipping, and other product delivery costs—and other miscellaneous expenses.

Marketing Costs

These are additional fees charged by the credit card company for customer acquisition and promotional campaigns. These costs—typically 30-40% of merchants’ revenue—vary depending on the type and amount of advertising used to obtain customers.

Types of Businesses More Likely to Be Affected By Chargeback Fees

Some types of businesses are more at risk of chargeback fees than others.

Non-traditional and high-risk merchants may be more prone to chargebacks, such as the following:

Adult and dating
Auto parts and accessories
CBD
Debt consolidation
Direct marketing and eCommerce
Gaming
Legal services and law firms
Membership and wellness
Nutraceuticals
Property management
Subscription
Timeshare
Trials

How Much is a Chargeback Fee?

The chargeback fees vary depending on the type of card used to purchase and your agreement with the acquirer. It often ranges from $25-$1000 for each chargeback on top of the purchase amount.

High-risk businesses typically have even higher chargeback fees.

If companies add up all the hidden and indirect fees connected with chargebacks, they can often incur more than double the original transaction amount.

Can You Prevent Chargeback Fees?

Practicing simple strategies can quickly reduce the likelihood of costly chargeback fees for your business.

Establish Exchange and Return Policies

Return, exchange, and refund policies should be outlined clearly on your website to provide transparency for cardholders. This can help reduce the number of chargebacks due to buyer’s remorse, as customers know exactly what is expected of them when making a purchase.

Provide Quality Customer Service

People may dispute charges if they feel that their customer service experience was inadequate. Ensure customers receive the best possible experience and provide helpful information, support, and follow-ups when necessary.

Manage your customers’ expectations through clear and accurate product descriptions and delivery times. This can help reduce cases of friendly fraud due to misunderstandings about product quality or shipment delays.

Use Chargeback Fee Prevention Tools

Implementing chargeback fee prevention tools can help reduce your chances of being hit with expensive fees due to fraudulent card transactions or merchant errors.

Solutions such as 3D Secure authentication and tokenization can help keep customer data safe and secure.

Consider using fraud prevention tools such as 3D Secure and Verified by Visa to help reduce the chances of fraud occurring on their site.

Monitor Suspicious Activity

Businesses can reduce their exposure to chargebacks by monitoring suspicious activity on their sites. These include multiple purchases using different cards but with similar shipping addresses.

Proper documentation around transactions should also be kept to defend against false claims from customers.

Get Chargeback Management with Von Payments

Understanding how chargeback fees work, their impact on your business, and preventing them can be daunting. As a business owner, you must know the strategies and solutions available to protect your business from chargebacks.

Von Payments is a high-risk payment processor that offers streamlined chargeback management solutions to help you reduce the risk of fraudulent activity or accidental transactions.

Our merchant services include a chargeback monitoring program, providing instant alerts on suspicious activity, tracking chargeback dispute statuses, and making doing business quick and secure.

With Von Payments’ comprehensive merchant account services and reporting features, your business can reduce the time it takes to manage chargebacks while reducing losses due to fraud or other mistakes.

Save money on processing fees and enjoy secure payment processing for your high-risk business. Contact us today and discover how Von Payments can assist you in managing the hassle of chargebacks.

Tags chargeback fees, chargeback management, chargebacks

Chargeback Management High-Risk Merchant Account Payment Processing

What is a High-Risk Merchant Account?

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Credit card payments are convenient for buyers, but they’re equally advantageous for merchants. Credit and debit cards make the payment process fast and secure and encourage shoppers to spend more.

A study by two MIT professors showed that shoppers who were asked to pay by credit card were willing to pay more than twice as much on average as those who were told that they would have to pay by cash. Global cashless transactions are projected to grow at 18% from 2020 to 2025 and exceed the one and a half trillion mark in sales volume.

But at the same time, there is a risk involved in card transactions for certain products or services. And it’s the payment processing company that picks up said risk.

This article discusses why some types of businesses may be considered high-risk merchants and how to find a payment processor if you need to start a high-risk merchant account.

What is a High-Risk Merchant Account?

When payment processors review your merchant account application, they may categorize you as a high-risk merchant. This means that, according to the payments company, your business transactions carry an inherent risk of high chargebacks, a high volume of returns, or fraudulent transactions.

A payment dispute arises if a cardholder doesn’t recognize a particular transaction and asks the card-issuing company to cancel the transaction. Known as a chargeback, this is a practice to protect the cardholder from fraudulent transactions. But if chargebacks become more frequent or are applied in error or without due reason, they can become a burden for the merchant.

One of the most important implications of being a high-risk merchant is that you may have to cough up higher credit card processing fees or compensate in other ways for the risk that a credit card processor picks up with your account.

In a way, chargebacks are inevitable in the card processing industry. But payment processors must also work to protect merchants from unfair chargebacks.

Von Payments offers a chargeback management service that helps you cut your chargeback ratio by as much as 40% by addressing potential disputes before they turn into chargebacks.

Reasons a Merchant Might be Considered High-risk

There are various reasons a business owner may be labeled as a high-risk merchant—let’s look at some of them.

You’re a new business, have little history of card transactions, or have new or bad credit score. The payment processing company may be uncertain about how much business volume you will generate and whether you will be able to maintain a low chargeback rate.
You are in an industry that is highly regulated or inherently prone to a high risk of fraudulent transactions.
You sell certain products or services that have historically suffered from high chargebacks.
You sell travel-related services or ticketing for airlines or cruises.
You have a business that’s listed on the Member Alert to Control High-Risk Merchants, or MATCH list.

No single regulatory body decides if a particular category or type of product or service is risky. Instead, every payment processing company, bank, or financial institution has its criteria to evaluate a business as a high-risk merchant.

Traditional processors often turn back high-risk merchants, while other companies—such as Von Payments—specialize in payment processing for high-risk industries.

Types of High-risk Businesses

There are a variety of businesses and industries that fall into the high-risk category. Here are some examples –

Adult products or services
Online gambling or online dating services
Substances such as e-cigarettes, CBD, or vape products
Supplements and nutraceuticals
Travel companies and ticketing services for airlines, cruises, etc.
e-Commerce, furniture, and electronic stores
Multilevel marketing (MLM)
Subscription services, SaaS products, and companies with recurring payment methods
Pawn shops
Firearms
Mail-order transactions

High-Risk Merchants vs Low-Risk Merchants

There some key differences in how payment processors treat high-risk and low-risk merchants to think about before diving into a potentially high-risk industry –

Higher payment processing fees: The payment processing company charges a processing fee for each transaction over and above the interchange rate. A higher fee is usually applied to high-risk accounts, which may differ from one processor to another.
Lengthier application process: Most payment companies will review and approve merchant account applications for low-risk, small businesses within hours. But for higher risk categories, businesses are usually asked to provide more details, such as bank statements and previous transaction records, and a personal credit check may also be initiated. High-risk merchants also require a more extensive underwriting process before they get approval.

Higher chargeback fees: Every chargeback invites a penalty fee over and above the refund of the original transacted amount. High-risk accounts are generally charged higher chargeback fees to mitigate the risks that the payment processor picks up with a high-risk account.
Cash reserve requirements: Merchant service providers may hold some amount from the revenue earned by the merchant as a rolling reserve in the case of high-risk merchant accounts.
Volume caps: High-risk merchants may not be allowed transactions beyond a set or limited amount every month.
Additional technical requirements: The payment processor is free to add other thresholds to a high-risk merchant account contract. They may ask the merchant to put in place tools to detect and avoid violations that could lead to chargebacks or refunds. For example, if you sell age-restricted products, you may have to use a tool to detect and prevent underage customers from placing orders.

What To Do If You Need High-Risk Merchant Account Services

Here’s some helpful advice from our payments experts to secure your merchant account—even if you’re categorized as a high-risk merchant.

Be honest during the application process. Give the payment service company all the information they ask for and be transparent about your past transaction records and financial details.
Review cash levels in your bank account. Payment companies like financial stability—if you demonstrate that you hold a healthy cash balance, you are more likely to receive approval quickly.
Be prepared with all documentation. Payment companies may ask for back-dated bank statements and tax filing papers for high-risk credit card processing.
Assess which variables you have control over and try to take steps to mitigate risks. For example, you may try to improve a poor credit score or take measures to prevent chargebacks.
Communicate to customers upfront to prevent chargebacks and refunds. Check that your shipping and returns policies are stated clearly and are easily found on your website. Give customers an easy way to reach out to customer support so complaints can be resolved without refunds or chargebacks.
Be ready to learn from your processing company’s experts and follow their recommendations to set up a clean and clear payment process.

Payment companies that offer high-risk accounts work on custom pricing and not standard transaction rates, so it’s a good idea to set up a consultation with a company representative.

How Can High-Risk Merchant Accounts Find Payment Processors?

Finding a high-risk merchant account provider can be tricky. Here are some tips for finding the best one for you:

Search for a high-risk payment processor with significant experience in working with businesses in your industry or sector.
Look out for processors featured in trade magazines or industry conferences and events.
Find out details about the processing company’s policies—such as how much reserve they require or when you can access your funds.
Ensure you review the contract with the payment company to check if the terms of payment change at any time during the contract.

Find Your Answer With Von Payments

Von Payments can offer you a processing solution to your high-risk merchant account, no matter the industry you work in or the type of products and services you sell.

We deliver secure and trusted transactions with every payment solution for every customer.

Our expertise in chargeback management is what your business needs to reduce your chargeback ratio, ensuring the health and longevity of your merchant account.

Take advantage of our complete suite of fraud management tools, virtual terminals, payment gateway integrations, point-of-sale systems and phone-paired mobile card readers and set up a PCI-compliant payments system with Von Payments.

Speak with a Von Payments representative today.

Tags chargeback management, High-Risk Merchant Account, payment processing

Chargeback Management

Everything You Need to Know About Chargeback Management

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Chargeback occurs when cardholders have the option of disputing a transaction with their card issuer and requesting that it be canceled, commonly referred to as a “chargeback.”

Despite being a valuable tool for consumers to protect themselves against fraudulent charges, chargebacks can create significant headaches—and administrative strain for businesses as resolution proceedings often take several months.

Businesses recognize this and have implemented chargeback management strategies to mitigate and stop chargebacks.

In a study conducted by Midigator, an Equifax company, 40% of merchants employed various chargeback prevention solutions like Rapid Dispute Resolution (RDR).

The chargeback process can be tiresome and lengthy, not to mention a high risk of financial loss. Once a customer initiates the process, their card issuer will freeze funds from that transaction until all parties agree on its status. And if the issuing bank decides to rule against you, you will NOT be able to get your money back.

Ensuring your guard is up against erroneous or fraudulently issued disputes is of utmost importance to avoid financial losses and administrative delays.

This article will show you how a solid chargeback management system offers a fast, easy, and affordable way to manage and fight chargebacks and streamline the resolution process.

What Is Chargeback Management?

Chargeback management is a term used in business to describe the various activities and processes involved in handling customers’ requests for the reversal of charges or payments to their debit or credit cards. It usually occurs when customers believe a merchant has wronged them—for instance, if they have not received the goods or services they ordered or were overcharged.

Chargeback management encompasses all aspects of dealing with chargebacks from prevention to resolution. It includes card processing, issuing refunds, communicating with customers and merchants, and managing chargeback disputes.

Chargeback management aims to ensure that customers receive the refund they are entitled to and that merchants are not unfairly penalized. It also helps protect a company’s reputation by establishing strong relationships between customers and merchants and creating an environment that encourages excellent merchant practices.

High-Risk Businesses Are More Prone to Chargebacks

Certain companies are more prone to chargebacks than others, mainly because they’re in high-risk industries or offer services that customers cannot physically inspect before purchasing.

Companies in high-risk areas usually have to contend with higher pricing, “risky” items, and a significant sales turnover—all of which can lead to a higher dispute and chargeback rate.

Below are examples of high-risk businesses and why they may be more prone to chargebacks:

Adult and dating: Adult entertainment and dating services are often seen as high-risk businesses due to friendly fraud, catfishing, and risky activities.
Auto parts and accessories: Auto parts dealers, car detailing services, and other automotive-related businesses can be more likely to experience chargebacks due to their inability to guarantee the quality of their products and services. They also sell high-price, in-demand products to an irregular customer base or a wide range of buyer types.
CBD: Companies selling CBD products are often subject to chargebacks due to the product’s legality in some states and countries.
Debt consolidation: Companies that offer debt consolidation services deal with customers who mostly have bad credit records and poor cash flow.
Direct marketing and eCommerce: Direct mail and ecommerce companies are vulnerable to chargebacks due to increased fraud and the potential for customers to receive goods or services they did not order, do not want, or bought on a whim.
Gaming: Online gaming services are more likely to encounter chargebacks due to customers overspending or disputing charges after realizing the game was not worth the money they paid. Online gambling services are more likely to experience chargebacks due to customers disputing charges after losing money.
Legal: Companies providing legal services—particularly those that require payment upfront—are more likely to suffer from chargebacks due to customers not understanding the terms of the service or not being satisfied with the outcome.
Membership and wellness: Companies providing gym memberships, health clubs, and other wellness programs deal with customers who are sometimes not satisfied with the services they receive or those who cannot sustain a long-term commitment to fitness.
Nutraceuticals: Nutraceutical companies are often subject to chargebacks due to customers not being satisfied with the product’s (instant) results.
Property management: Companies that offer property management services may be at higher risk of chargebacks due to customers disputing charges for services they feel weren’t adequately performed.
Subscription: Subscription services are more likely to encounter chargebacks due to customers not being satisfied with the service. Some also cancel their subscription before receiving their full benefit or subscribe on a trial basis and forget to cancel the subscription before they’re charged fees.
Timeshare: Timeshare companies deal with chargebacks due to customers disputing charges after realizing the service wasn’t worth the money they paid. Many customers also change their minds, cancel their trips, or need help to sustain the long-term arrangements in timeshare offerings due to changes in personal circumstances.
Trial and continuity: Companies offering trial and continuity programs may experience chargebacks due to customers not understanding the terms or not being satisfied with the services they receive.

Von Payments’ Turnkey Chargeback Solutions

When it comes to risk management and chargeback disputes, a generic approach is never the answer. As each business has its own needs, dispute resolution must be tailored accordingly.

Here at Von Payments, we don’t just stop at providing you with the best payment processing solutions to maximize your business potential. We also want to help you keep your hard-earned dollars.

While chargebacks are a natural part of processing payments online, we will help you prevent most chargebacks at the source—plus track, manage, analyze, and represent you when these disputes escalate.

Chargeback Alerts

Von Payments sends alerts and tracks chargebacks at the source—all while managing, analyzing, and representing you when these disputes escalate. This helps you, the merchant, fix any issues before they turn into chargebacks.

Our service promises to reduce the risk of your business being exposed to this statistic by proactively alerting you to any potential chargebacks. This allows you to respond quickly, and our team will help you easily manage these disputes.

Von Payments can help you cut your chargeback ratio by as much as 40% by addressing potential disputes in real time before they turn into chargebacks.

Take advantage of our popular alert products:

Verifi CDRN
Ethoca Alerts
Verifi Order Insight
Ethoca Consumer Clarity
Rapid Dispute Resolution

Chargeback Representation

Von Payment chargeback representation service is designed to help you gather crucial data for informed decision-making. We do this by:

Observing chargeback reason codes
Optimizing transaction dispute responses
Representing you in actual chargebacks disputes
Providing you with timely ROI reports that show metrics like dispute rate, win rate, and recovery rate

In case of a chargeback, we investigate the situation, compile evidence, and represent the transaction to the bank.

Rapid Dispute Resolution (RDR)

Von Payments leverages Rapid Dispute Resolution (RDR), one of the more effective methods of preventing disputes before they become actual chargebacks.

Developed by Visa, RDR triggers at the card acquirer level, automatically refunding transactions with a high likelihood of becoming chargebacks on your behalf. And even if you’re already in breach of Visa’s chargeback threshold, you can quickly reverse course and your chargebacks are under control with RDR.

From our years spent fighting chargebacks, we find RDR to be a fantastic solution to reducing your chargeback ratio, ensuring the health and longevity of your merchant account.

Here are some of the benefits of RDR:

Fully automated
Prevent chargebacks
Reduce false positives
Reduce friendly chargebacks
Quick deployment
More sales at higher conversion

Benefits of Chargeback Management Software

Quickly Reduce Chargebacks

Through automation and machine learning, chargeback management software quickly determines valid claims and can quickly reduce the number of chargebacks you have to deal with. Your merchant account will be less risky, and the funds can flow more easily into your business, resulting in more profits.

Even better, effective chargeback management software allows businesses to appropriately identify fraudsters so they can take appropriate action against them, improving security for everyone involved in your business operations.

Save Sales More Frequently

For any merchant, lost sales are frustrating and costly. Chargeback management software can be a massive help in eliminating this problem. It will track chargebacks and provide you with actionable intelligence to make informed decisions.

This software will help retailers identify which types of sales are more likely to succeed, thereby saving the company from the hassle and cost of negative sales resulting from chargebacks. Furthermore, AI technology in such software can detect fraudulent activity before it even happens, helping retailers prevent losses altogether.

With chargeback management software, businesses have every resource they need to save their sales more frequently and keep their bottom lines healthy.

Chargeback management software streamlines the dispute resolution process and automates different procedures, such as fraud detection, notification responses, and chargeback data review.

Manage Disputes and Chargebacks in One Place

Chargeback management software is an incredible tool for streamlining dispute management and overall chargeback operations. Instead of constantly looking through multiple locations to find the necessary data, chargeback management software consolidates all this information into one intuitive platform.

A powerful chargeback management software not only removes the burden of manually tracking disputes and chargebacks but also helps businesses stay on top of those issues with notifications to alert them when new challenges arise.

It also creates an organized platform, housing all cases under one platform—making it easier to manage, monitor, and analyze reporting data. This platform allows organizations to quickly and easily find the necessary information and manage customer disputes on time while limiting fraud exposure.

Inform Future Fraud Prevention

Chargeback management software can be an invaluable prevention tool in any business’s arsenal of fraud prevention techniques. By effectively tracking and monitoring chargebacks, companies can better identify patterns of fraudulent activity, as well as high-risk customers.

With timely notifications and actionable insights, businesses can quickly detect irregularities, take sophisticated steps to prevent disputes from reaching the chargeback stage, and avoid costly assessments and penalties.

Chargeback management software offers fraud protection as it provides insight into customers’ purchase histories. This data can be used to identify potential problems, from cases of possible fraud to unforeseen chargebacks from unhappy customers. Using this data, merchants can form better strategies to prevent future fraud and chargebacks before they become costly.

Chargeback management software makes an ongoing endeavor out of fighting fraud, making it possible for even small business owners to gain control over payment processes—essentially free from the risk of fraudulent charges.

Communicate Refunds Quickly

Chargeback management software is excellent for any business trying to secure revenue from transactions and manage customer issues.

Not only does this software protect your business from fraud, but it can also communicate refunds quickly, providing fast resolutions that prevent customer negative experiences or reviews. For those seeking an efficient way to handle refunding process in large batches, the software allows these batch requests to be sent out without having to enter each transaction through slow manual processes.

From small businesses to large corporations, chargeback management software substantially benefits streamlining businesses’ financial operations while building customer satisfaction and loyalty.

Chargeback Management is Done Right With Von Payments

Chargebacks are an unfortunate but inevitable part of the business—but that doesn’t mean you have to let them ruin your day.

Von Payments provides comprehensive, full-suite chargeback management solutions to maximize your business potential. As your partner in chargeback management, we aim to enhance dispute resolution and your processing capabilities so you can focus on scaling your successful business.

With our quick, easy, and affordable solution, you can rest assured that chargebacks will be managed efficiently and effectively.

Tags chargeback management, chargebacks

What Are Chargeback Fees and How Do They Work?

Different Types of Chargebacks

Types of Fees Included in a Chargeback

Transaction Fees

Acquiring Bank Fee

Business Operation Expenses

Marketing Costs

Types of Businesses More Likely to Be Affected By Chargeback Fees

How Much is a Chargeback Fee?

Can You Prevent Chargeback Fees?

Establish Exchange and Return Policies

Provide Quality Customer Service

Use Chargeback Fee Prevention Tools

Monitor Suspicious Activity

Get Chargeback Management with Von Payments

What is a High-Risk Merchant Account?

Reasons a Merchant Might be Considered High-risk

Types of High-risk Businesses

High-Risk Merchants vs Low-Risk Merchants

What To Do If You Need High-Risk Merchant Account Services

How Can High-Risk Merchant Accounts Find Payment Processors?

Find Your Answer With Von Payments

What Is Chargeback Management?

High-Risk Businesses Are More Prone to Chargebacks

Von Payments’ Turnkey Chargeback Solutions

Chargeback Alerts

Chargeback Representation

Rapid Dispute Resolution (RDR)

Benefits of Chargeback Management Software

Quickly Reduce Chargebacks

Save Sales More Frequently

Manage Disputes and Chargebacks in One Place

Inform Future Fraud Prevention

Communicate Refunds Quickly

Chargeback Management is Done Right With Von Payments

Von Payments

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