Merchant Accounts and "Net Billing?"

Are you getting your fees back on returns?

[joestern]

I'm doing a comparison of merchant accounts, and in the process I discovered that my current merchant account bills by gross, not net.

I'm very surprised to find this, as, for years, I've asked about this to be sure, and they've always told me it's on the net total. But when I try to read the statement, I can't see how that's true. So then I call, and they assure me it's always on net charges, not gross.

Here's a simple example. Let's say I charge a customer $10,000. So I pay my fees of about $200 (2% of the total), plus my per-transaction fee of 25 cents.

Then, the customer returns the item. I credit back the $10,000. I pay another transaction fee of 25 cents.

Turns out, though, that (ignoring per-transaction fees) while I only received $9800 when I charged the customer, my merchant account processor is, in fact, taking the full $10,000 back from me on the credit.

By comparison, both PayPal and Google Checkout do refund their fees with credits. So if the customer had paid via one of these methods, I'd only pay $9800 to get the customer a $10,000 credit, with PayPal or Google also refunding their $200 to make the customer whole.

The misinformation from my account provider really irks me, because I sometimes do advanced-exchanges, where I charge the customer and refund them when I get the defective merchandise back. So I thought I was just losing the 25 cents twice. But it turns out I'm losing 2%. So I should authorize but not capture, and cancel the authorization when I get the defective merchandise back.

But there's not much I can do along those lines about general customer returns.

Does anyone have a merchant account that behaves differently?

I assume that at the interchange level, percentage-fees are reversed at the time of credit. Does anyone know how that works?

Thanks

[LifeinAsia]

Several years ago, AMEX used to refund the fees for refunds/chargebacks. Now they just don't charge a fee on the refund/chargeback.

Some MAs charge the fees on refunds/chargebacks. So not only are you not getting your fees refunded, but you're paying them twice!

[bwnbwn]

joestern this is why in your refund policy you need to add a restocing fee of 15% to cover the expenses. All merchant accounts are like this more so on internet orders so this is something that has been eating your profits.

We do not do a 100% refund unless we make an error and then do 100% refund if the customer places the order and does not cancel and we bach out for the day they get charged 15% as once the batch has been run you can only do a refund.

Oh yea we don't refund the shipping cost either.

[joestern]

I'm talking to a bunch of new potential companies about providing my merchant account, and some do claim to do "net billing."

My company sells parts to fix products, and due to the nature of the items, we have a ton of returns - probably something like 5% of overall sales. So if I can get my fees back, I'm essentially lowering my fee by 5%.

I do charge a restocking fee, but that covers the free shipping and the wasted packaging.

The other problem is: just like me not understanding this, customers don't.

Finally, on a personal level, why does a bank take back my frequent flier miles if I return merchandise, since they're getting the fees either way? Seems like quite a racket.

[joestern]

On a related note, in trying to get my non-qualified charges down and my qualified charges up, I can't seem to get the details on which sales are charged which way, and why. My statements have no detail.

[CreditCardGuy]

I will be glad to help you all understand your statements. I will offer you no pressure advice on your accounts and I can explain to you the benefits of various pricing programs.

Net billing versus Gross billing is dependent on the credit card processing company. I'm pretty sure all companies can do it but that does not mean all companies are willing to do it.

You may also want to check about your daily deposits also.

If you have a large enough volume you can negotiate monthly deposits. This means you don't pay your fees till the end of the month. It helps with your reporting and you keep your money longer.

[edited by: tedster at 7:49 pm (utc) on Mar. 15, 2009]