Lower Chargeback Rates Can Lower Risk Profile

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Chargeback rates play a huge role in a merchant’s risk profile. There’s no better time than the present to concentrate on reducing chargeback rates.

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Among the seminars at the Transact 15 Conference and Trade Show was one entitled High Risk: What it is, How to Handle it and What the Label Really Means, which drew an intense discussion on the definition of high risk. Payment processors, banks and the card associations each define it differently. Chargeback rates, however, play a huge role in the definition of risk, particularly by acquiring banks and card associations.

Can Low Chargeback Rates Lower Risk Profile?

Absolutely. The higher the chargeback rate, the more a bank or credit card issuer views you as a risk. Some merchants accept chargebacks as just another business expense -- they are content to cut their losses. But there is no better time for merchants than the present to lower their chargeback rates.

Now is the Time to Take Chargebacks Seriously

A few weeks ago, Instabill copywriters blogged about how some major banks are beginning to rid their portfolios of high risk merchants. In recent months, Instabill merchant account managers have had to find credit card processing options for more than 30 merchants who were abruptly closed down by their banks.

“Are some industries going to have higher chargeback rates than others? Absolutely,” said Wendy Jacques, Sales Manager at Instabill. “Banks get nervous when they see a merchant with a chargeback rate over 2 percent.”

Acceptable chargeback rates differ according to the card brand. For example, Visa mandates that chargeback rates not exceed 2 percent or 200 transactions in a month while MasterCard’s chargeback rate is 1.5 percent and 100 chargebacks a month. When merchants exceed their rate, they face stiff fees from the card brand and their payment processor.

Which Industries are Known for Chargebacks?

There are several industries plagued by chargeback rates:

Tech Support: Consumers are often given an estimate for a repair, yet the cost of the repair exceeds the estimate, resulting in a consumer filing a chargeback with their credit card issuer.

Travel/Hospitality: Consumers book flights and hotel stays months in advance, then cancel their plans for whatever reason. When their credit card statements list the airfare and hotel cost, they file a chargeback instead of the preferred refund.

Nutraceutical: Nutraceutical products sometimes come with a 30-day free trial. The consumer forgets to cancel the trial after the month and disputes the charge on their credit card statement.

Magazine Subscriptions: Similar to nutraceuticals, consumers are often offered a free trial and, if dissatisfied, forget to unsubscribe after the trial is over. A phone call to their card issuer usually follows.

Keep Chargeback Rates Low With Instabill

As a resource to its network of merchants, Instabill offers its Instabill.org website to merchants as the ultimate guide to avoiding and mitigating chargebacks. Merchants can learn about the entire chargeback process in simple terms, learn to encourage refunds instead of chargebacks and how to handle chargeback retrievals. Our merchant account managers also serve as chargeback experts and are reachable by selecting the live chat option below.

About the Author

chargeback rates

Chris O’Donnell is the Senior Copywriter at Instabill. Chris is a devout Barclays Premiership fan and connoisseur of rock and roll music. He joined the Instabill team as its senior copywriter in December of 2013. He can be reached at 603-436-1270 or at chris@instabill.com.


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Apr 8, 2015 Category: General Posted by: Marketing
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In Chargebacks 101 for Merchants, Instabill teaches business owners about the chargeback process and chargeback reversal process. Instabill also offers advice on how to prevent chargebacks as well as credit card fraud.

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In Chargebacks 101 for Consumers, Instabill clearly identifies the similarities and differences between refunds and credit card chargebacks. Consumers can learn what situations are best for each type of transaction.

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Instabill is an Internet payment service provider with more than 12 years of credit card processing experience. Learn more about Instabill as well as why the company created the website Instabill.org.

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