3% cap on chargebacks for 2co

What are the caps on other gateways / merchant accounts?

[logiclamp]

The merchant account I deal with has a 3% cap on chargebacks, and at that point(that is if your chargebacks as a % of total dollar volume in sales is greater than 3%) they charge $50 per chargeback and you get noticed by the risk department.

I have never had a chargeback in the 8 months I've been doing this, however I have been working with paypal and it was never an issue with them.

However, now that I have added 2co I find that I am running into all sorts of weirdness. I have had 3 transactions cancelled by 2co because of fraud (never saw that with Paypal even once, not even after over 2000 transactions).

I am concerned because I have given prominence to 2co, which I am beginning to wonder if it was a mistake. I've only been with them with about a month so the first round of chargebacks would theoretically be coming through now.

I also wonder if customers (not vendors) buy from 2co websites because its an easy target for fraud, or even a desirable one because they have an axe to grind with them. I know they have had problems with DOS (they talk about it in their newsletter) .. what other problems are they having with hackers?

Any thoughts on this? What have people seen as a cap for other services?

[derekwong28]

I think all services will have some sort of cap of chargebacks. As far as 2CO is concerned, we left them mainly because of their poor fraud screening procedure. At that time they provided no details on the credit card used.

Now they provide CVS and AVS. However, they still do not provide a means of identifying orders made from one country using a credit card issued by another. The latter is by by the greatest source of fraud.

Incidentally, many of the orders cancelled by 2CO turned out to be perfectly valid afterall. The customers paid with escrow.

I don't think you need to be too worried at this stage. You should assess whether the products you sell are highly susceptible to fraudulent purchases i.e. those that could be resold quickly. Also, if you do not ship internationally, the chances of fraud are much lower.

[logiclamp]

What sort of chargeack cap are you used to seeing? Is 3% reasonable?

Yeah, I looked at the IP addresses of some of the so called fraudelent orders and they all seemed fine.

[derekwong28]

I don't know what are caps for other payment processors, but I think most would start getting nervous once the rate goes beyond 1%.

I would not be surprised that the transactions cancelled by 2CO were in fact genuine. You may wish to approach these individuals and ask them to pay with PayPal.

I don't think you need to worry this much at this stage. If you have processed over 2000 PayPal orders without any problems, you are unlikely to get big problems with 2CO.

[Corey Bryant]

A lot of times, it is 1%. Processors vary. A lot of them are actually 1% and Visa or MasterCard can fine the merchant $10,000 for chargebacks. But since you are dealing with a third party processor - their rules are different & they are then subject to those fines by Visa & MasterCard.