What We Tell High Credit Card Chargeback Merchants

What We Tell High Credit Card Chargeback Merchants

As a high risk merchant account provider, we receive countless inquiries from high credit card chargeback merchants. Sometimes we can help these merchants. Other times, however, when their chargeback rates are particularly high, we don’t have a solution.

In cases of the latter, we often get the response, ‘But you’re a high risk provider. Why can’t you help me?’

True, Instabill works with high risk businesses almost exclusively, including those that traditionally incur high chargeback rates. That doesn’t necessarily mean, however, that we have solutions for those merchants with high chargebacks. They are two separate issues.

Payment processing for high risk merchants is in a different era than it was 2-3 years ago. We call it the ‘Little-to-No Tolerance Era.’ Five years ago, we could find solutions for merchants with high chargeback rates. The very term ‘high chargeback rates,’ has a different meaning now.

High credit card chargeback merchants need to answer hard questions

Sometimes the answer to a merchant account application is a ‘no,’ that the acquiring bank decides the merchant is too high a risk. Thus, the applying merchant is left without an option. It is a situation that is not always received well. To make merchants understand our side, we offer a question a merchant must pose to his or herself:

If you were the acquiring bank, would you assume the risk on a similar merchant?

“Just because we are a high risk merchant account provider doesn’t mean you can get a merchant account if you have high credit card chargeback rate,” said Wendy Jacques, sales manager at Instabill, dismissing a common belief. “There isn’t a solution or an answer to a merchant with high chargebacks. It’s not industry-based. Industries with typically high chargeback rates don’t get a break. Sometimes the bank cannot take on the risk. Banks must protect themselves.”

Does a rolling reserve improve your chances for approval?

A common belief (though somewhat misguided) is that merchants with high credit card chargeback rates can incur a rolling reserve to lessen the risk for the acquiring bank. We field offers such as this quite often, but the hard truth is that offers of rolling reserves do not influence an acquiring bank to grant credit card processing. When appropriate, acquiring banks dictate the terms of a rolling reserve to some high risk merchants – the terms are non-negotiable. A rolling reserve is not and never has been a bargaining tool for merchants with high credit card chargeback rates to use to get a merchant account.

What is the merchant’s chargeback dispute history?

Back in June of 2016, about six months into Visa’s implementation of 1 percent/100 chargebacks per month threshold, we blogged about an important issue: Should a merchant fight chargebacks if s/he is under the 1 percent/100 level? We gave an emphatic yes.

Let’s pose two situations in which two high risk merchants are consistently, dangerously nearing the chargeback limit. One merchant has been active in mitigating and reversing chargebacks, perhaps winning several disputes. The other merchant absorbs the chargebacks, claims they’re just part of doing business. Eventually, each merchant becomes in danger of losing their merchant account.

Our question: If you are the acquiring bank, which merchant are you going to want to work with?

We feel that if a merchant suffers chargebacks, but has a history of putting forth the effort to mitigate and dispute, the acquiring bank is going to be more sympathetic and willing to work with them.

Our best advice: Be proactive and preemptive with chargebacks

Rule No. 1 in e-commerce is that chargebacks are going to happen. Rule No. 2 is that you can’t change Rule No. 1. Our best advice is to be proactive and preemptive with chargebacks. Instabill offers its free online guide, Instabill.org, to mitigating chargebacks for merchants of all risk levels.

What is your solution to mitigating credit card chargebacks? Leave us a comment below.

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