David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
In the latest episode of our merchant education series we tackle the seemingly simple topic of costs. In addition to exploring the discount rate and interchange costs, we outline and provide some metrics for the actual rate you should be willing to pay for your business.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
If you've ever been confused by the difference between a merchant account, a payment gateway and processor you are not alone. In this discussion we break down the role each of those elements play, and how they affect your overall processing costs.
In order to accept credit card payments a business needs a merchant account. In this article we explain what a merchant account is, how to get one for your business, and the costs involved.
There is a lot of confusion when it comes to pricing in the payments industry. The most important cost of all is the discount rate. Learn what the discount rate is and why it's the most important and significant cost when processing credit card transactions.
Making the wrong choice can be costly when choosing a payment processor. David explores 3 of the most common mistakes so you can avoid them when choosing your credit card processor.
The debit system in Canada is called Interac. It's totally different from Visa or MasterCard so it works in its own unique way when it comes to making purchases online.
If you've not accepted credit cards previously you may wonder how long it takes to get your money. In this video David explores the most popular funding schedules for e-commerce and brick-and-mortar merchants.
How to pick a good credit card processor for your business. David gives advice so you can ask the right questions, avoid mistakes, and figure out which payment processors have the potential to be a good solution for your business.
When you work with a payment processor it becomes a long-term partnership. It requires a deep integration if you're doing e-commerce payments, and will have a long-term cost impact on your business. Outages are problems along the way can cause a major issue. In this video David explains when and how to look for references when searching for a payment processor for your business.
An original credit transaction is where a merchant sends money (gives money) to a cardholder. It's a unique service, but merchants should be very careful when using it.
MCC stands for Merchant Classification Category. Every type of business that accepts Visa or Mastercard has a MCC code associated with their business. David explains why the MCC code used for your business can impact the approval rate for your transactions (the wrong MCC code can result in more declined transactions), as well as the costs that you pay when opening your merchant account.
Certain types of businesses are more difficult to administrate from a payment processing perspective than others. In this video David explains what Visa HBR and Mastercard BRAM fees are, how much they cost, and why they apply to some businesses but not others.
Most credit card processors will ask for a copy of the most recent balance sheet and profit and loss statement when you apply to get a merchant account. David explains why payment processors care about company financials, how it can impact your application, and what you can do if the financials for your company are not as good as you'd like.
How to lower your chargeback ratio
(Slightly edited from video transcript for greater readability)
Key Takeaways
1
Ideal Chargeback Treshold
Merchants should aim to keep their charback treshold below 1%.
2
Proactive Customer Communication Reduces Disputes
Maintaining clear and timely communication with customers can prevent misunderstandings that lead to chargebacks.
By promptly addressing customer concerns and providing detailed product or service information, merchants can foster trust and reduce the likelihood of disputes.
3
Consider creative solutions
Implementing basic anti-fraud methods like 3D Secure and AVS can prevent fradulent orders.
However to go beyond this and help eliminate friendly fraud which may successfully navigate this first level of security,
merchants may employ other creative stratgies such as offering a complimentary service which customers would be unlikely to dispute.
Need help with this topic? Or a rate quote?
Whether its questions about this article, or you want to see how we can lower your costs. Don't hesitate to contact us.
Hello, David here Merchant-Accounts.ca. Today I'm going to talk about what you can do to reduce chargeback rates and improve your statistics. Stay tuned, we'll dig in in one second.
Chargeback Thresholds
Now, I've produced other content on the Visa, MasterCard, and chargeback thresholds, and you can find that information on the Merchant-Accounts.ca YouTube channel. If you want all the details, you can dig into it. If you're not familiar with it, I suggest that you do. On a high level, as a merchant, you have to keep your chargeback rates under 1%. In this video, what I'm going to discuss is a strategy that some businesses can employ to help you achieve this and come in under those thresholds.
Some businesses have higher chargeback rates
Now, some types of products or services are simply going to have more disputes than others. Now, in my left hand here, I have a can of delicious cranberry ginger ale, it was wonderful. I also might have purchased speculative crypto moneymaking investment advice, you know, paper. Now, which of those two things am I more likely to potentially be unhappy with? If we're willing to acknowledge that some businesses have more disputes than others, then what can you do if you have a business that tends to get too many chargebacks?
Friendly fraud
In this discussion, I don't want to center on fraud, there are so many modern tools for fighting fraud like 3D Secure. What I want to talk about today is friendly fraud card holders are now using other dispute reason codes to win a chargeback, whereas before they might have just claimed, hey, I didn't authorize this transaction. Since that's no longer possible, cardholders are claiming other things, like hey, I didn't get what I was promised. They might bend the rules in some cases, but they still get to do the chargeback, which is a problem for you, the merchant.
Complimentary Service
This doesn't have to be a complicated video. I can get to the bottom line pretty quickly. Why don't you find a complimentary service product or service that's related to what you sell? It costs less money and you can use this product or service to help adjust your chargeback thresholds.
I'm going to give an example. Let's say you have an electronics repair business that specializes in really difficult-to-repair electronics. Your policy might be, okay, send it to us, and we're going to charge a $100 fee. We're going to spend up to an hour and a half looking at it. If it's repairable after that, it'll cost you the parts plus $50 per hour to fix. In some cases, people are going to send stuff in that's beyond repair, and those customers might end up charging it back even though your policy was reasonable and clear. Now, in this example, there are probably a couple of things you could do, but what I'm talking about is adding a new product or service line that's less likely to result in a chargeback. For example, you could add a new $5 service where you get on the phone with the customer or a Google Meet or something and they show the item and you talk about it to help them determine if it's likely able to be fixed. Now, most people won't bother charging back a $5 transaction. For every $5 transaction that's not charged back. It's improving your stats and chargeback ratios. It's important that it has to be a real legitimate service. However, if you can generate a lot of sales for this new service that doesn't get charged back, it's going to massively help your overall stats. Now, this is a good strategy for any business that deals with unreasonable customers.
Another example might be people who are purchasing something about filing for bankruptcy. Now, these folks are more likely to do a chargeback simply because they're hard up for cash. Now, it doesn't make it right if they file an unreasonable chargeback, but this might be the reality of your business. If you can find a service for them that provides a ton of overwhelming value for a very minimal cost, they're not going to charge it back.
I do admit that this video is kind of living on the edge of the type of advice I give, and it's not for every business. However, I have to acknowledge some people do have businesses that just get more disputes and they're very legitimate businesses. It's just their product line, and it's very hard. I often find it has to do a lot with the demographics of the customer base of these merchants. In that case, what are your options? You can try to change the habits of your customers. That's pretty much impossible. You can change the demographics of your customers. In other words, change your customer base, but your business might not allow for that, or you might just provide something of overwhelming value that they hopefully won't charge back, which I think is a good strategy. As I said, this won't work for every business, but I'm certain there are some businesses out there that could benefit from it.
Summary
In summary, if you have a high chargeback type of business or high dispute type of business, try to find a related product line that you can sell, hopefully, a lot of for our transactions that won't resolve in a dispute. It's very simple, but a lot of people do not think of this. With that, I think I've covered the base for this topic. If you have any questions, reach out to us at Merchant-Accounts.ca and I thank you for watching. Have a nice day. Bye now.
David talks about the most important things for small businesses to keep in mind when setting up credit card processing. This includes staying away from long term contracts, avoiding cancellation fees, putting your best foot forward for approval, getting lower rates, having automatic rate reductions built into your agreement, and addressing technical concerns so everything works smoothly upon launch.
In the latest episode of our merchant education series we tackle the seemingly simple topic of costs. In addition to exploring the discount rate and interchange costs, we outline and provide some metrics for the actual rate you should be willing to pay for your business.
Why do some businesses get lower credit card processing costs than others? In this video David explores the criteria that cause some businesses to get lower rates than others and techniques that you can use to reduce your processing costs.
If you've ever been confused by the difference between a merchant account, a payment gateway and processor you are not alone. In this discussion we break down the role each of those elements play, and how they affect your overall processing costs.
In order to accept credit card payments a business needs a merchant account. In this article we explain what a merchant account is, how to get one for your business, and the costs involved.
There is a lot of confusion when it comes to pricing in the payments industry. The most important cost of all is the discount rate. Learn what the discount rate is and why it's the most important and significant cost when processing credit card transactions.
Making the wrong choice can be costly when choosing a payment processor. David explores 3 of the most common mistakes so you can avoid them when choosing your credit card processor.
The debit system in Canada is called Interac. It's totally different from Visa or MasterCard so it works in its own unique way when it comes to making purchases online.
If you've not accepted credit cards previously you may wonder how long it takes to get your money. In this video David explores the most popular funding schedules for e-commerce and brick-and-mortar merchants.
How to pick a good credit card processor for your business. David gives advice so you can ask the right questions, avoid mistakes, and figure out which payment processors have the potential to be a good solution for your business.
When you work with a payment processor it becomes a long-term partnership. It requires a deep integration if you're doing e-commerce payments, and will have a long-term cost impact on your business. Outages are problems along the way can cause a major issue. In this video David explains when and how to look for references when searching for a payment processor for your business.
An original credit transaction is where a merchant sends money (gives money) to a cardholder. It's a unique service, but merchants should be very careful when using it.
MCC stands for Merchant Classification Category. Every type of business that accepts Visa or Mastercard has a MCC code associated with their business. David explains why the MCC code used for your business can impact the approval rate for your transactions (the wrong MCC code can result in more declined transactions), as well as the costs that you pay when opening your merchant account.
Certain types of businesses are more difficult to administrate from a payment processing perspective than others. In this video David explains what Visa HBR and Mastercard BRAM fees are, how much they cost, and why they apply to some businesses but not others.
Most credit card processors will ask for a copy of the most recent balance sheet and profit and loss statement when you apply to get a merchant account. David explains why payment processors care about company financials, how it can impact your application, and what you can do if the financials for your company are not as good as you'd like.
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Can I Help Lower Your Processing Fees?
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My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
