|If high chargebacks do banks close merchant account?|
Recent high chargebacks have me worried.
I sell software and have recently a high percentage of chargebacks, up to 20% in the last two months. The quality of the software is not an issue so please don't recommend I make it better (I am saying this in a nice way so please don't be offended).
I am concerned that my account may be closed down.
Is this something I should worry about?
Are some banks or CC processing organizations more tolerant than others?
Yes, I would be worried at 20%.
Phone them, try pre-authorisation or ask about callback facilities - you may be able to write a script to allow some cards through, block others and put another set on pre-auth (awaiting validation by hand) depending on AVS results, security code results etc...
For 20% chargebacks, I would rethink your order process. Be strict with AVS, require CV2, call the card holder on suspect orders, log and track ip's and report all fraudulent cases to the FBI internet fraud center, look for other red flags such as shady free e-mail addresses, IP's in suspect places, etc. With 20%, you might lose your account soon.
You should also investigate the reasons for the chargebacks to see if there is a pattern to the problem. Are they from stolen credit cards? Certain countries or regions? Chargebacks because customer states they never received the product? Or the product isn't as described? Or because the product is inferior to what the customer expected? (I am not telling you to improve your product, but just stating one of the common reasons why people do chargebacks)
If there is a pattern to the chargebacks, that will give you a starting point to try and correct the problem and see if you can reduce your high number of chargebacks. And yes, 20% is considered high.
If your merchant account provider sees you are taking pro-active steps to reduce the number of chargebacks, this may help if they are considering dropping your merchant account.
Whew sounds like I have to spend a lot more time investigating this.
Are some organisations more tolerant than others and perhaps take a larger fee?
No merchant provider will tolerate 20% chargeback levels. Be prepared to start a new business with a new domain name in order to get a new merchant account from another provider.
Are you selling software by download? If so, have a read of this thread.
CF (back for one day only cos i need a break!)
Hmm if your volume is low you could try a faxed signature kind of deal, so you got somethiung hard to go by. I've known folks in the travel industry to do that, that I'm working with.
I think your bank needs to see you are taking the issue seriously, which you clearly are.
If they feel you are selling goods of an unmerchantable quality, you will lose the facilities.
As mentioned before, it may be worth your while creating a safety net by opening another account but don't rely on it because the closure may be like a domino effect, close all accounts in the relationship.
Discuss the matter with your bank and explain that because of the online guarantee offer a 100% full money back ...bla bla bla, you feel they are taking advantage of the situation etc.
This isn't legal advice by the way, just my opinion.