Something to think about before you process credit cards.

8 replies
OK, I know that there are a lot of people who process cards everyday with no problems, so this thread isn't meant to scare anyone, but to inform you of something that you might not be aware of.

When you have a merchant acct. and process credit cards, you run the risk of someone performing a charge-back. That is, they call the card company and reverse the payment. When your "charge-back" ratio goes over 1-2%, your bank won't like it.

This can cause you to lose you merchant acct. and be put on the TMF list. This is basically a list of people who had high chargebacks or other issus with their merchant accts.

What's so serious about it is that it's very hard to get off that list and while you are on it, you basically can't process credit cards at all....even for a different business. New banks won't accept you and you may not even be able to have a paypal acct.

Here's a thread that talks a little more: Put on the TMF, please help [Archive] - Web Hosting Talk

Now, will paypal put you on the TMF or just cancel your paypal? I don't know.

If you're only doing a low volume, it can be easy to hit that 1 or 2% mark. It could be something as dumb as a client forgets he hired you, reads his statement, and disputes the charge.

With how serious this is, checks are looking like a much better option!
#cards #credit #process
  • Profile picture of the author amarketing
    In my post, I remarked that I was unsure if paypal put members who had a high chargeback ratio on the TMF or not. Also, what if someone sends payment with their own paypal, but funds it with a linked credit card and then reverses it?

    I emailed this question to paypal and will update everyone on the response.

    The thing is, this goes beyond offline marketing, but also doing services in wso section, etc. Someone may just do a charge back so they can get something for nothing...some card companies offer unquestioned chargebacks to their customers.

    Will let everyone know what comes back from paypal on the issue.
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  • Profile picture of the author MaxwellB
    Chargebacks are not new. They are a fact of life. If you protect yourself legally you should be able to fight them. Your bank and merchant is normally on your side, with the opposing bank and cc company on the customers side so you do have help. And It doesn't work as you say, as soon as you hit 1% they don't automatically close your account and blacklist you.

    They take into account your volume of processing, how many transactions per month etc.

    Online marketing will never move away from paypal. It's what's trusted by customers.

    Offline however we try to limit our credit processing by using bank drafts.
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  • Profile picture of the author planbpayments
    You should opt for a high risk merchant account, if your online business is prone to High Chargeback rate.
    There are several acquiring banks that accept high risk businesses.
    And there are several Aggregator merchant account providers who offer a payment processing solution to merchants put on the TMF list.
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  • Profile picture of the author amarketing
    Updating this thread really late, so sorry about that.

    The email to paypal really didn't clarify things much. However, I did find this thread: Limited due to match list. - eBay Suspension & Paypal Limited Forums

    Apparently, the author was making over $50,000 per month on Ebay when paypal closed his account due to him being on the tmf list, and it seems like paypal put him on the list. That being said, with all of the people using paypal, it looks pretty good if this is the only instance I can find.

    MaxwellB, you're well informed and thanks for the input. Sorry if I mis-explained how the process went. I didn't mean to imply that it's an automatic trigger if you go over 1-2%, just that it's a general rule it seems. Also, it's good to hear that your bank and merchant will help you get off the list. I've read a story, however, where the business person had someone buy from his site using stolen cards, causing chargebacks, etc. He filed reports and did all the best practices, but still lost his merchant acct. Maybe that story is the exception to the rule.

    Also, as to them taking your volume into acct., I've read some say that if you have a high-volume month, followed by a low-volume month, and the chargebacks come in from the high-volume month on the low-volume month, they will calculate the % based on the high/vol month's chargebacks compared to the low/vol month's volume. Wow, that's a confusing run-on sentence, but to sum it up, it's an inaccurate way of calculating percentages. Now, maybe this is only with certain merchants and others are more fair.

    Not saying that you're incorrect. My experience in only anecdotal whereas yours seems to be real-world. Again, thanks for your input.
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  • Profile picture of the author Rus Sells
    For every client in Offline I ALWAYS insist on a filled out and signed credit card authorization form and it includes a photo copy of the CC and DL.

    That gets attached to the clients Statement of Work contract as an addendum and the contracts states that the CC authorization form is a part of the binding agreement of the contract.

    Most people tell their credit card company that the charges were unauthorized so when you present the agreements the tables turn and the card holder can actually get in trouble for fraudulently claiming unauthorized charges.
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    • Profile picture of the author amarketing
      Rus,

      Great advice. This shows why it's so important to get good legal advice whenever doing business. Sometimes it can be expensive when you're first starting out, but they say that it pays for itself in the long-run.

      I'm still trying to find out if Paypal will in fact list you if you get a lot of chargebacks. I've only been able to find that one that I linked to, though. So if they do, it's not that common considering how many people use paypal and only one or two instances of that happening.
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      • Profile picture of the author ronr
        I've used merchant accounts process members of subscription sites for over 10 years. Every once in a while I get a chargeback. I would simply send a printed copy of my sign up page, my my disclosures, membership agreement and information they filled out on the online form and I win the disupute every time.

        Ron
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    • Profile picture of the author OnlineStoreHelp
      Originally Posted by Rus Sells View Post

      For every client in Offline I ALWAYS insist on a filled out and signed credit card authorization form and it includes a photo copy of the CC and DL.

      That gets attached to the clients Statement of Work contract as an addendum and the contracts states that the CC authorization form is a part of the binding agreement of the contract.

      Most people tell their credit card company that the charges were unauthorized so when you present the agreements the tables turn and the card holder can actually get in trouble for fraudulently claiming unauthorized charges.
      Thanks for this. I never thought about doing this. I only got charged back one time and because he didnt remember by LLC but I will definitely start doing this now.
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