>it could also pocket money that would be paid by CC.
No.
The card processor will return the customer's funds for various reasons. In many cases, "no reason" is sufficient for a chargeback, especially if you are dealing in intangibles, such as software licenses or digital media. In addition to returning the customer's funds, the merchant is typically penalized a "chargeback fee". This means as a merchant, if your chargeback fee is $25 and the product is $5, one chargeback can set you back 6 sales.
For these reasons, as well as other minimum rates, certain price levels are untenable. Consequently, many products are either not sold at all or sold at a much higher price.
The conditions make it more sensible for the merchant to sell high priced items to less troublesome customers. The percentage of the card processor's fees are relatively less. The probability of a chargeback is lower. As you have less customers, you can more easily provide support and contact them directly.
Was wondering what anyone's experience with chargebacks are in general. I could imagine that, in the worst case, if combined with 'card testing' as a merchant you could immediately get slammed with thousands in unavoidable charge back fees? Maybe i'm hyperventilating but thats huge, really. I hope theres some stop gap.
Yes, that can absolutely happen if you don't have the right controls in place. If you get too many chargebacks, the card networks will kick you from the system.
Card testing won't (usually) do it, because that doesn't (usually) generate chargebacks[0], but yes, you will absolutely get smacked with fees if it happens. It really sucks.
In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
Also: no-reason chargebacks are absolute BS. I worked on a PSP for a largeish adult entertainment business, and I remain convinced that most porn chargebacks are a case of "post nut clarity".
> In the case of fraud (like the article's example of a thieving storefront), banks can simply reverse the transfer. This is not an all-or-nothing deal where CCs are always safe because of theoretical chargebacks, and bank transfers are not.
US wire transfers generally can't be reversed --- sometimes, if an error is noted immediately, and the destination bank cooperates, they'll send the money back; but the recipient can pull cash out immediately or wire the funds somewhere else immediately, and then your recourse is through the courts. ACH transactions are like checks; they can be reversed, but only if there was a mistake or they were unauthorized, not because of a service complaint; again, if you have a service problem, recourse is through the courts.
I'm not sure how that works on the continent for transfers, but with cards or PayPal the chargeback/dispute policies are usually pretty clear. Basically, the merchant is always wrong for even being in the neighborhood of a disputed transaction. If you don't have a signed delivery confirmation for your card-not-present transaction, you're out of luck.
Chargebacks are for unauthorized transactions and broken contracts, not anything you regret. Attempting to chargeback an authorized transaction where you received the goods or services is a felony.
Also a chargeback is what the bank does to the merchant. From your perspective as the end user, you don't do a chargeback. What you do is you complain to your bank and they decide how to proceed from there.
No.
The card processor will return the customer's funds for various reasons. In many cases, "no reason" is sufficient for a chargeback, especially if you are dealing in intangibles, such as software licenses or digital media. In addition to returning the customer's funds, the merchant is typically penalized a "chargeback fee". This means as a merchant, if your chargeback fee is $25 and the product is $5, one chargeback can set you back 6 sales.
For these reasons, as well as other minimum rates, certain price levels are untenable. Consequently, many products are either not sold at all or sold at a much higher price.
The conditions make it more sensible for the merchant to sell high priced items to less troublesome customers. The percentage of the card processor's fees are relatively less. The probability of a chargeback is lower. As you have less customers, you can more easily provide support and contact them directly.