My Merchant Account Blog

Chargebacks Are Not Worth Fighting

Wednesday, May 16, 2007

For whatever reason, some merchants are not worrying about chargebacks.  They might only get one every few months but they are not replying to it.  I guess they feel that the card associations are going to rule against them, so why bother? Well you bother because it is your business, it is your right to fight.

For example, if someone were to walk into your store, load up a basket full of items and walk out the front door - you would stop them, right?  By not fighting a chargeback, you are allowing the customers to walk right in and take whatever they need.  OK, you might have insurance but guess what, your insurance rates will go up because your risks are going up.  Your merchant account fees will also go up or they might even suspend or terminate you because you are a higher risk.

Retrieval Requests and Chargebacks

Of course, the first is to always try to prevent a retrieval request or a chargebacks. A retrieval request could be as something as simple as I don't recognize the name of this company.  I wrote about this because this happened to me once as a consumer: Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks.  It also happened back in October.  I sent in my yearly membership fee to Sam's Club.  Over the weekend, I was checking my credit card statement online and noticed a charge for Wal-Mart.  Since I knew I had not been to Wal-Mart, I called the credit card company and told them the charge was unauthorized and to send me a new card (I thought my card had been compromised).  The next day I remembered I had used that particular card to pay for my Sam's Club membership via United States mail, but surely a company as large as this and actually wanted to get into this business would have a correct merchant identifier on the credit card statement?  It turns out I was wrong, since the charge was the same amount as Sam's Club's fees. 

Just to remind you just in case - always respond to a chargeback, no matter what.  That is unless of course, you are a merchant who opened a merchant account to process thousands of fraudulent credit card transactions in a short period of time.  Yes, those people do exists and you want to make sure that your provider does not think you are one of those types of merchants.

Some Basic Merchant Account Fees

Thursday, May 03, 2007

Merchant account fees vary per provider. The more volume you do, the better chances you have that your discount rate will be lower.  On your merchant account agreement, you will find some or all of the fees listed below.  If you see that you are being charged for something that was not on your merchant account agreement, contact your merchant account provider immediately.

Merchant Account Fees

But there are so many fees associated with accepted a credit card.  Some of the fees are (in no particular order):

• (Qualified) Discount Rate
• Transaction Fee
• Electronic Gateway Fee
  • Set-up Fee
  • Monthly Fee
• Batch Fee
• Address Verification Service Fee (AVS)
• Chargeback Fee
• Retrieval Request Fee
• ACH Fee
• Early Cancellation Fee
• Monthly Minimum Fee
• Cancellation Fee
• Monthly Fee
  • Statement Fee
  • Customer Service Fee
• Yearly (Club) Fee
• Point-of-Sale (POS) Terminal (lease or buy)
• Mid-Qualified Rate
• Non-Qualified Rate

Some fees above range from 5¢ to $50.00.  A lot of the fees can also be negotiated by you, especially if you have a lot of volume. And most of these - you won't ever see.

Discount Rate

The discount rate is a percentage of the sale.  The more volume you have, the lower the discount rate will be.  Right now, some providers are offering 2.39%.  Usually you can get a discount rate lower than this, even if you are only doing $10,000 a month.

Transaction Fee

The transaction fee is usually imposed by the electronic payment gateway. You will see some gateways giveaway a number of transactions per month, some might charge 10¢ per transaction, some might charge a percentage and some don't charge anything.  This might also be called an Authorization Fee.

Electronic Payment Gateway Fee

This set-up fee can usually range from $0.00 to about $500.00 per month, depending on the gateway.  The monthly fee is around $15.00 - $50.00 a month.  Take into consideration the number of transactions that you get for free as well when determining what is the best monthly fee for your account.

Early Cancellation Fee

Usually most merchant account providers request some type of a commitment, ranging from six months to three years.  And some providers will give you more discounts if you sign up for a longer contract.  Most businesses usually plan on being in business for years, so a 6-month contract is usually nothing to them.

Batch Fee

The batch fee is usually the same amount as the authorization fee from the merchant account provider.  This fee is usually charged when the merchant account provider moves the money into your checking account.

Address Verification Service (AVS) Fee

The Address Verification Service fee is usually 5¢ - 10¢ per transaction. This is your first line in defense on preventing fraud. Usually with recurring billing done via the electronic payment gateway, the AVS does not need to be accomplished and you will not be charged.  This function cannot be done usually on for consumers not living in the United States and will usually cause the transaction to be downgraded to a non-qualified rate.

Chargeback Fee

This fee is charged to you if a consumer calls the issuing bank to dispute the charges.  There are Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks.

Retrieval Request Fee

This fee is sometimes charged along with a chargeback. It's a fee that the providers charge to pull all the information on the transactions. This fee can also be just when the consumer does not remember the transaction and requests more information about it.

Monthly Minimum Fee

This fee guarantees the merchant account provider a set amount each month from the merchant.  Usually though, this never affects the merchant.  For example, let's say your discount rate is 2.25% and the monthly minimum on your merchant account agreement is $25.00.  During the month of April, you processed $10,000.  The merchant account provider's portion would be $225.00 (10,000 * 2.25%).  The monthly minimum fee of $25.00 has been met and no charges should be applied.

Let's say you were just starting out and you did $1,000.00 that month.  The merchant account provider's portion would be $22.50, so you would still owe the merchant account provider $2.50.

Cancellation Fee

Some providers will charge this fee when your contract ends.  Usually this fee is waived and most are veering away from this fee.

Miscellaneous Monthly Fees

Some providers will charge some type of a monthly fee, usually $10.00 - $25.00 a month.  They might call it a statement fee, a customer service fee, or just monthly fee.

Yearly (Club) Fee

Some providers have a yearly fee as well as the monthly fee. They might offer you specials for signing up for this fee.  Or this fee might not be optional and you might have to pay a yearly fee to have a merchant account with that provider.

Point-of-Sale (POS) Terminal (lease or buy)

This equipment would only be if you had a retail business.  The terminal would be used to swipe the consumer's credit card.

Mid-Qualified Rate

This rate is applied to certain transactions when specific credit card types are used. This rate will usually only apply to retail businesses.  Some providers might downgrade reward cards - ask your merchant account provider for more information.

Non-Qualified Rate

This rate is applied to certain transactions when specific credit card types are used, i.e. business or corporate cards.  Ask your provider to reduce this amount if your business accepts a lot of cards that are downgraded.  Other reasons that some providers might downgrade your transaction(s) to the non-qualified rate are:

• AVS is not done on a keyed transaction
• Batches are not done in a timely manner - be very careful with this one, if you are late all transactions in that batch will be downgraded
• A special card is used and the correct data was not entered (Level I, Level II, Level III data)
• A credit card was used that was not issued in the United States
• A credit card number was keyed in on a swiped account

Of course these rates vary per processor and the rules vary as well.

Your merchant account provider should be able to answer the above with ease.  These are the very basics of the credit card industry.