My Merchant Account Blog

Subscription Based Websites

Saturday, December 02, 2006

A lot of websites are based on subscriptions. Charging a consumer for anything is very risky and charging them monthly just makes it riskier. You run the risk of chargebacks and fraud. A lot of times, these go hand in hand. Someone might want to see what you have to offer and will use a credit card number that does not belong to them. By the time that you find out, they could potentially have used your services for a couple of months. You are now out your subscription fee(s) as well as chargeback fee(s). A few of these can potentially ruin a merchant.

You have a number of options available to you and choices to consider. The first, of course, is do you really want to get involved with something like this? Once you realize you do, you will want to protect your merchant account. You might even consider using a third party processor to process your transactions. Using a third party processor will help with a lot of the "scrubbing". Scrubbing basically means that the transaction will go through a few fraud prevention tools to help verify the transaction.

Once this is completed and the transaction is deemed OK by the processor, the consumer will be allowed access to your site. A lot of times, chargebacks will happen in days of the transaction. The consumer might not have thought it was worth their money. And instead of calling you, they contact their issuing bank. A good rule of thumb for this is to always send out an email maybe a couple of hours later even asking them about the service, etc. This way you open the communication with them.

Depending on the issuing bank, the consumer can have months to potentially request their money back. Usually with a debit card (with a Visa or MasterCard logo on it), the time frame is less than a credit card (with a Visa or MasterCard logo on it). With American Express, the time frame increases to almost forever. I have seen merchants complaining of chargebacks from over 18 months. This is why you should always keep records.

There are pros and cons to a subscription website. Whenever you are dealing with consumers, the word chargeback always lurks around. Increasing your business unfortunately increases your risks. You will want to do everything possible to scrub the transaction to prevent a chargeback.

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