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  1. #1
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    I'm about to set up my first merchant acct have some questions I'm not sure if I can/want to ask the company...
    What's the deal with chargebacks? Should I set up a separate bank acct for my merchant acct & when money comes in, transfer it to my main bank acct? This company requires a voided check, I assume for a credit check and/or direct deposit? I'd rather not set up a new checking acct & wait for checks...savings accts are easy to set up over the phone...I really don't know how direct deposit works, to tell you the truth...can they take money out of the acct automatically for chargebacks? Or, do I have to save the money for 6 months in case there is a chargeback? Also, I understand that you can appeal a chargeback...is that after you've paid the money back? If I have terms that must be agreed to by checking a box before the purchase & clearly stating that all sales are final, will that protect me?
    After talking to a rep from the company I'm looking at going w/ for the merchant acct, I'm really worried about this..he gave me a scenario of going on vacation, spending $5k, coming back, calling the CC Co. and saying you didn't enjoy the trip & they do a chargeback & you get all your money back...This is scary as hell from a merchant's standpoint & even more so from a perspective merchant's standpoint...
    I'm now more than two weeks behind schedule on my new site because of these concerns...I should have brought this up here a while ago..
    Thanks in advance!
    -E

    Supras | Celicas

  2. #2
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    Celica,

    Will try and answer your questions. If I miss something, let me know. [img]/infopop/emoticons/icon_wink.gif[/img] This is how my merchant account works, but it's probably pretty standard and the chargeback thing is set by banking law. Plus my merchant bank is one of the top 3, so...

    It's really up to you whether or not you want to use a separate checking account or not. How your business is set up may dictate also (sole prop, corporation, etc). You might want to discuss this with your accountant. The merchant bank doesn't particularly care themselves. The voided check is far the reasons you stated and because they will also automatically withdraw fees from that same account.

    A customer can file a chargeback for any reason. I just got my 3rd chargeback in 3 years. The type of products/services you are dealing in will factor into how often you may receive chargeback complaints. Some products are just more open to fraud. When one is filed, the money automatically comes out of my account. The merchant bank will always favor the customer initially. Within a day or so I receive paperwork with details regarding the chargeback (customer, order, reason). I have a certain timeframe to respond and make an appeal. Customers will do chargebacks for the most ridiculous reasons. Sometimes they don't recognize the name of your business on their statement. The one that just happened, the Post Office had a delay in delivering the product. I had been in contact with the customer, gave them proof the product was shipped and it was somewhere in their state, and it had only been 10 days anyways shipping via Parcel Post (per the customers choice). I had filed the paperwork with the Post Office for a missing package and emailed the info to the customer when they told me they called the credit card company and cancelled the charge. [img]/infopop/emoticons/icon_rolleyes.gif[/img] Of course that very day, their package arrived. In every instance so far I've gotten the money credited back to me, but I still get socked with the $20 chargeback fee. You need to keep a buffer in your account for possible chargebacks and when they deduct their fees.

    My sales batched for a particular day are deposited in my account within 24 to 48 hours. The lenght of time depends partly on your bank and how quickly they respond to electronic transfers. My bank doesn't do anything with electronic deposits over weekends, so I get a couple of days worth of deposits showing at the first of the week for the weekend sales. AmEx and Discover take a couple of extra days to get to you over Visa and MC payments. AmEx deducts their fees with each sale transactions (a big PITA as far as accounting), but the rest come out with the fees at the beginning of the month. You don't know exactly what this amount will be until it happens. You just get a feel for it over time and kind of know what to expect and to make sure you have enough money in the account to cover it. There are a lot of incidental fees that add up. Don't figure just the discount rate they are quoting you. Those per request authorization fees add up. You get hit for those even if the card is denied, or you get that totally clueless customer who doesn't understand about billing address and their card keeps getting bumped but they'll try 12 times. Each time is an authorization fee. Then you have those transactions, for whatever mysterious reason, get charged what they call partial or nonqualifying, which is an additional % over your discount rate.

    The products I sell are low fraud risk, so I haven't had much of a problem with chargebacks. Good customer service goes a long way with combatting this. But you will still occassionally get the wayward customer. If you will be selling actual products, be sure to ship with some type of tracking and/or delivery confirmation! It's your best protection for the customer who says they didn't receive their order. You have to keep your chargebacks below a certain % of your sales anyway or you'll lose your merchant account. But if you're running a clean business, it really shouldn't be a problem. Although I don't know if I would have the nerves of steel to do a high risk business (like downloads). [img]/infopop/emoticons/icon_biggrin.gif[/img]

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  3. #3
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    OMG!!!!!
    How could everybody I've talked to just forget to, or choose not to tell me all this?!?!?!

    I guess I have a ton of time wasted, money down the tubes and a domain to sell...

    I don't think I want to deal with any of this BS...It was going to be a service that they would recieve through my site...but if I can't get rolling with out having thousands of dollars in the bank to cover any possible fees and chargebacks, then there's no way in hell...

    AAAARRRRRGGGGGHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!

    Supras | Celicas

  4. #4
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    <BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR>Originally posted by Celicaphile:
    OMG!!!!!
    How could everybody I've talked to just forget to, or choose not to tell me all this?!?!?!

    I guess I have a ton of time wasted, money down the tubes and a domain to sell...

    I don't think I want to deal with any of this BS...It was going to be a service that they would recieve through my site...but if I can't get rolling with out having thousands of dollars in the bank to cover any possible fees and chargebacks, then there's no way in hell...

    AAAARRRRRGGGGGHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!

    http://www.suprazone.com | http://www.toyotacelicas.com<HR></BLOCKQUOTE>

    Use paypal, they are hard as hell to charge back.

    Im not joking!

    You have to be very careful abotu some of these merchant companies. A lot of them are very scandalous.

    You need to make a LOT of profit to justify some of the costs involved and with a "real" merchant account, there are a lot of recurring monthly fees. Loads of them AND they almost always make you sign a contract, usually 48 months AND it is noncancellable and they sue you if you do not pay them.

  5. #5
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    PayPal just has such a horrible reputation...and people know this. I think they're fine for small item purchases on eBay, but I wouldn't trust them for larger transactions. Plus, if someone raises a stink, they'll freeze my acct. What happens when someone files a complaint after I've transferred the money out?

    I don't think there are any hidden fees w/ the company I was looking at...this is what they offer:
    Real-Time Account Reporting
    Cutting-Edge Fraud Screening
    Charge-Back Management
    Refund Management
    Full Transaction Gateway
    24/7 Merchant Support / Toll-Free Number
    24/7 Cardholder Support / Toll-Free Number
    NO Application Fees
    NO Monthly Fees
    NO Statement Fees
    NO Gateway Fees
    NO Leases
    NO Maximum or Minimum
    FREE Deposit of Funds in the US
    FREE Shopping Cart and Cataloguing Systems
    FREE Use of Secure Server
    Multi-currency payment processing
    Real-time check processing
    Unlimited product database
    Unlimited item sale price
    Unlimited monthly volume and transactions
    Unlimited customer database

    Basic Rate Structure

    One time set-up fee $49.00
    Type A Discount Rate and Per Transaction Fee 3.95%* and $1.00*

    Supras | Celicas

  6. #6
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    What is their monthly limit? Did they say?

    Their discount fee is very high, but well, thats the way it goes I guess.

  7. #7
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    Reading the fine print on a merchant account is very, very important!!!!! I know one merchant provider (a major provider at that) had some decent rates....I looked into them and they sent me the paperwork and looking everything over, I found a ton of fees that I was never told about on the phone or on their website. My understanding is they have to disclose this info, but some will only disclose it in their agreement with you. Not all companies are like this. In fact, you and I have discussed one company via e-mail....the rates they gave me in their agreement is the same they gave me over the phone and that is posted on their website. I did some research on the company before I even spoke with them and heard nothing but good things about them...and this was from webmasters in a similar business as myself. Just be sure to read, and read...then re-read it again to be sure [img]/infopop/emoticons/icon_wink.gif[/img]

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  8. #8
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    Sounds like your talking about xxxsystems?

    I have been very happy with their service, they do hold back 5% for six months to cover off chargebacks, they also have two structures, look at both,it depends on your average $ticket, I chose 5.5% and .45 transaction

    I used to have a merchant account, but if your doing less than $750/mth it isn't worth it. I got dropped due to one large chargeback, they wanted payment of $600 within 3 days, and I couldn't get it together quickly enough.

    If you go the merchant account route, you will be looking at software charges and fixed terms, as well as discount rates and per transaction fees.

  9. #9
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    TH Media,
    Can you say who this merchant is? I feel it's always fair to everyone else who may be looking at them to at least give them a little heads up... kinda like "gas leak is a time bomb for local neighborhood...news at 11" [img]/infopop/emoticons/icon_razz.gif[/img]
    were you referring to me when you mentioned the email? as far as I know, we've never exchanged emails...
    I know where you stand on 2checkout & let's just say that bridge was burned from both ends...


    so, let me get at least one thing straight...I will be losing money for at least the first six months since I can't spend anything I make & I will be taxed by the merchant co. for various fees... grrreeeeeaaaaat [img]/infopop/emoticons/icon_frown.gif[/img]

    Supras | Celicas

    [This message was edited by Celicaphile on December 15, 2002 at 06:07 PM.]

  10. #10
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    Don't freak out yet Celica. It's not necessarily as bad as it seems. But those fees sound way too high. [img]/infopop/emoticons/icon_frown.gif[/img] I can see why they say no statement or gateway fee. They make it up and more on the discount and transaction fee. I'm paying 2.something% (I just had increases with Discover, MC, and Visa) which is probably pusihing close to 3% now and .30 per transaction. That $1.00 is ridiculous! You need to find out if they have the gateway part tied to them. Sounds like they might. If not, you will also need a gateway (even though a merchant account will assess a gateway fee, it's not the same as your gateway). Either way, you need to check about what exactly the per transaction fee is.

    For example, a customer comes to your site to buy something and places an order. Their credit card info gets send off in real time and banking systems issues an approval or denial and an AVS response. There's your per transaction fee via the merchant bank. But there is also a gateway service involved. They are the ones handling all the info for you and transmitting it to the merchant bank. They will also charge a per transaction fee. But one sale, usually equals more than one transaction. One is for the request to the banking system for approval. Then the second is when they batch all your transactions for settlement. So there is actually 2 per transaction fees per sale with the gateway. Many gateways aren't clear about this. If you issue a credit for a customer, that's another 2 per transaction fees. They can nickel and dime you to death.

    But gateway's are notorious for having problems. I'm on my third one now. I would never have my gateway tied to my merchant account. Your stuck if you have a problem with their services. I've had problems with gateways like their servers being down a lot, which meant no sales could go through. High amount of duplicate charges being generated. One company had something screwy in their coding and they weren't passing the info correctly to the merchant bank, so all my sales got classified as non qualified which meant I was getting the extra % fees which added up.

    Some merchant banks will make you hold back a certain % for chargeback, mine doesn't. Sometimes it depends on what you are selling online. Again, since certain areas are more prone to fraud, hence chargebacks.

    It really depends on what $$ volume you anticipate doing. A couple of years ago, when I worked the figures, you needed to be grossing around $2000/month before your own merchant account made more sense over a third party processor like 2checkout. That amount is probably a little higher now with the creeping up of fees by the merchant banks.

    If something has happened with 2checkout, you might want to check into a similiar service with another company. Some different ones have been mentioned here by other members off and on. I started out using ccnow. I was very pleased with their service. If you can wait for a bi-monthly payment, then it may be an option. The fees overall are higher, but if you are just starting out, it may be a good option. Overall, less money involved with lower monthly grosses. They actually were the ones who told me that I should start looking for my own merchant account as my monthly sales grew. Since I sell products, which I have to purchase, the bi-monthly payment became an issue at a certain point. But that isn't as much of an issue with selling a service. CCNow used to be for tangible products only, but seems I saw where they now had a service for intangibles. I recommended a few clients to them in the past, and never had any problems or complaints. They also provide the shopping cart.

    At one time a had a good bookmark for a site that reviewed, rated, and outlined various merchant accounts and third party payor services. I'll try and find it again. It might be on my old computer.

    But like THMedia said: read, read, read, and then re-read. There are reputable companies out there, but there are also many scams. There are only a handful of actual merchant banks, but tons of these companies. You think you are getting your merchant account through them, but in reality they are just procssing your app through one of the handful of banks. They are just putting all the pieces together for you. I learned the hard way, as far as customer service, etc you are going to want to deal directly with the indivdual companies anyway.

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  11. #11
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    Just checked and CCNow is still for tangilbe products only. But there are similiar services who deal with intangibles. Intangibles inherently have a higher incidence of fraud and chargeback claims, so you can expect to discount fees to be slightly higher. You need to make sure that they know you are dealing with a service vs. a physical product which is shipped. Anyway, I think iBill (if they are still around) does intangibles.

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  12. #12
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    BLFH,
    I'll be speaking to a rep from this company today, and have some questions already, but can you think of things that I should/need to ask?

    LanceR,
    Check your private topics [img]/infopop/emoticons/icon_smile.gif[/img]

    Thanks!
    -E

    Supras | Celicas

  13. #13
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    Celica,

    Which company will you be talking to today? The original company you referenced in your first post? [img]/infopop/emoticons/icon_wink.gif[/img]

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  14. #14
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    yah, the first post of this thread [img]/infopop/emoticons/icon_wink.gif[/img]

    Supras | Celicas

  15. #15
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    There are basically 3 components to having your own merchant account and processing orders online:
    1. the actual merchant account (the bank itself who deals with credit card sales)
    2. the gateway (the company who processes the sales information and transfers it to the merchant bank for settlement)
    3. the shopping cart.

    If this company is offerring an all inclusive package, ask them who the actual providers for each services are. Then you can do a search for the individual companies and see what others are saying about them. Many of these types of companies have reseller or distributor programs. Sometimes you can go direct with the same company and save fees. Sometimes not, as they offer a discount to their distributors. But worth looking into and investigating the reputation of the companies involved.

    Ask to see a demo of the shopping cart and gateway service. If there is not a demo available, that says alot right there.

    What are their antifraud protection measures? Most probably they mean AVS. See if you can also set CVV2 as mandatory. This is added antifraud protection (the 3 digit code on the back of the credit card). AVS is by no means full protection however. Ask about what options are available for the different AVS responses. I had the experience with one gateway that the default settings were to send through the charge as along as approval was received from the credit card company regardless of the AVS response. This resulted in additional fees by the merchant bank because since I have a MOTO account, I was "choosing" to disregard AVS nonmatches, which was an increase risk of fraud to the merchant bank.

    Where are you planning on accepting charges from? US only or international. If international, then there is a bunch of other considerations here. Much more increase risk of fraud and less you can do about it legally. Also AVS responses only for US banks (and not even all of them. For example not all credit unions have this function). There will also genreally be a difference in the discount rates for international card processing.

    Is the service you will be selling a subscription type thing? If so, you will need to ask about recurring charges.

    Do they track the IP address of the person making the purchase. Can help if there is a problem.

    Ask them about the typical fraud rate for what will be doing in particular.

    Will all your orders be taken online only? Any phone, mail, or orders from other services? If so then you'll need to be able to have the ability to manually place orders. Which usually involves software, and this is where the "leasing fees" come into play. Also, like I said, the AVS system is less than reliable itself. It has been known to deny charges which should not be denied. I experienced this with one gateway where I the AVS had to match exact address and full zip code. Sometimes when the AVS systems are down or overloaded, they just seem to belch out any old response. I would get complaints from customers. But I had the contact info to get phone approval from the merchant bank and then I could put the order through manually and "force" it through if need be. IOW, I could over ride the AVS response. Though I did this very judiciously, and usually only for customers who had ordered from me before.

    Is a shopping cart included? If so, you'll want to see a demo to make sure it meets your needs. Is the shopping cart hosted on their servers or yours. What is the compatabilty of the shopping cart with other services (ie gateways). Good thing to know in case you have to switch services. Believe me, there are not a whole lot of standards with programming here. And many components aren't compatable with each other. Along those lines, when they tell you have the merchant bank and gateway are, then call the merchant bank and make sure the gateway is certified with them! Speaking from persoanl headaches in the past here. The merchant bank maintains a list of gateways who have met their testing and compliance.

    What are their contract terms? IOW, are you contracturally bound to use them for a certain period of time.

    Just a few questions of the top of my head. [img]/infopop/emoticons/icon_biggrin.gif[/img]

    Again, take THMedia's advice. No matter what they tell you, ask to see the contract in advance and reread, reread, reread it. j

    If you haven't already done so, do a search for the company and see what you come up with. You will be amazed sometimes. Also checking with both the BBB on online BBB isn't a bad idea either.

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  16. #16
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    BLFH,
    Thanks for the lengthy and very informative posts...I sincerely appreciate the time and effort you put into helping me out. I used your suggestions and my questions were answered & I think I'm good to go [img]/infopop/emoticons/icon_smile.gif[/img]
    Thanks again, you're a real asset to ABW & site owners like myself [img]/infopop/emoticons/icon_smile.gif[/img]
    -E

    Supras | Celicas

  17. #17
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    Celica,

    Glad things are good to go far you. Here's wishing you many direct deposits in 2003, and no chargebacks! [img]/infopop/emoticons/icon_biggrin.gif[/img]

    Glad it helped and getting long-winded comes easy to me.

    But it can be pretty confusing when you first start looking into merchant accounts. I thought I was well informed and had done quite a bit of research before I took the plunge. I still found out many things the hard way. Suffered through more than one anxious moment (or rather day). Would not wish that on anyone if it can be helped. [img]/infopop/emoticons/icon_wink.gif[/img]

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