What Is a Chargeback and how it is Painful for Your Adult Business?
A chargeback is a dispute over an already-charged purchase that can result
in a refund of money.
You would believe this is the same as a refund, but there's a distinction to
be made. A refund is handled and processed by your credit card issuer or bank, whereas a chargeback, also known as a payment dispute, is handled and
processed by your credit card issuer or bank.
It's critical to keep track of your overall chargeback rate. However, there
are a few more things to consider. The first is the total number of transactions you make per month. Payment processors (though not often direct processors)
will usually grant smaller firms some leniency when it comes to the 1% guideline. If you have three chargebacks and 200 payments every month, it would
be excessive to delete your account - they'll just state it as one bad month.
What You Can Do About Chargeback Procedures That Are "Unfair"
When compared to direct merchant accounts, third-party processors are often
a superior alternative for the great majority of online and offline companies. These third parties provide more flexibility and buffering space. Merchants
can put down deposits to build this buffer with some processors. As a result, it will allow them to temporarily improve their chargeback rate.
You can also look for high-risk merchant accounts
with foreign processors. However, it will come at a cost. The average processing rate for these businesses ranges from 7% to 10% per swipe. Some of
them are even higher. You should sit down and determine whether paying more is the most cost-effective option for your company. A better option would be
to reduce your chargebacks in the first place.
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