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Chargeback Guardian Sheild Did you know?

1: Other than a chargeback percentage over 1%, what other statistics do Visa/MasterCard consider red flags?

  • More than 50 MasterCard Chargebacks in a single month
  • More than 100 Visa Chargebacks in a single month
  • The total Chargeback dollar volume exceeding $2,000
  • Receiving chargebacks in the first month of processing with a bank or processor

2: How do I calculate my chargeback percentage?

Number of chargebacks in a month divided into the number of Visa/MasterCard transactions that same month.
Dollar volume of chargebacks in a month divided into the total dollar volume of Visa/MasterCard transactions processed in that same month.

3: What factors do banks consider when allocating processing volumes?

  • Business type (Examples: retail, internet, MOTO)
  • Business industry (Who are the target customers?)
  • Products or services offered
  • Average sale amount (The higher the ticket, the greater the chargeback risk.)
  • Finances of the business (Examples: P&L, balance sheet, tax returns)
  • Principle owners' credit scores
  • Principle owners' finances (Examples: checking account statements, tax returns, assets)
  • Similar business processing history
  • Merchant account processing statements

4: Can my processor/bank close my merchant account even if I haven't done anything wrong?

Yes and they do! Processors maintain underwriting agreements and guidelines from a sponsoring bank. Based on a bank's appetite for risk, those guidelines can, and often do, change without notice. If the bank you are processing with decides to withdraw from your industry, it could mean the immediate closure of your processing account. When this happens, businesses are forced to endure days, or even weeks without the ability to process sales. This circumstance clearly has a severe impact on merchant revenue and in some cases forces complete business closure.

5: What factors trigger risks flags for processors or banks?

  • Spikes in processing volume
  • Processing larger tickets than account is approved for
  • Receiving chargebacks in the first month of processing

6: The most common reasons merchants are placed on the Match file?

  • Excessive chargebacks
  • They owe a processor or bank money for fees, refunds, or chargebacks
  • They are processing for a product different from what the account was underwritten for
  • They are aggregating or factoring for business not otherwise included in their merchant application
 
Chargeback Guardian Sheild Glossary of Terms:
 
Acquiring Bank:
Banks that sponsor merchant accounts for businesses. These banks may also be Issuing banks. Processors contract with the Acquiring banks in order to provide Merchant Accounts to individual merchants.
Card Not Present (CNP) Transactions:
A credit card transaction that is taken without the customer physically being at the merchant?s location. (Examples: Internet, Phone orders, Mail Orders, etc...)
Chargeback Advice:
Notification from the bank that says ?We have reversed the transaction and taken the money back from your bank account. Now tell us why we shouldn?t have.?
Friendly-Fraud:
A legitimate transaction that is charged back based on buyer?s remorse or other exploitations of consumer protection regulations. Fraud, in the traditional sense, is when a merchant wrongfully charges a customer. Friendly-Fraud is typically when a customer wrongfully charges back a bona fide purchase to the merchant.
Gateway:
A company who transfers transaction information over the internet to Visa/Mastercard for processing. The gateway company must be PCI DSS compliant.
Issuing Bank:
Banks that issue credit/debit cards to consumers.
Processor:
Company that handles initial underwriting, account setup, processing and customer service for Acquiring Banks.
Retrieval Request:
Notification from the bank that says, ?This customer is disputing a charge. Please send us documentation so we can evaluate the legitimacy of the charge.?
Terminated Merchant File or Match file:
A list kept by banks and processors as a way to warn each other of businesses that have in one way or another violated their merchant agreement. If a Processor terminates a merchant for rules violations, then they must place that merchant on the Match List or they could be held responsible for any losses that another member bank may incur because that merchant was not listed by the previous processor.

 
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