Posted 09/05/2014 11:47 am
I used to operate an internet business that accepted credit card transactions directly, before PayPal really took off.
A chargeback happens when a buyer initiates a claim with their credit card company for one of several reasons, such as, they don't recognize a charge on their card, they never received the good or service promised, etc.
The onus is on the merchant to prove the transaction did occur with the knowledge of the buyer, or the product was received as promised etc.
If, within a designated amount of time, the merchant cannot prove the transaction was valid, which sometimes requires a signed statement from the buyer, then the credit card charge is reversed, and the merchant is charged a fee by their credit card company for the bad transaction in addition to losing the funds from the transaction.
Too many chargebacks, and the fee (% of sale) the merchant pays to the middle man or bank who handles the credit card transactions can go up for every transaction. When I was doing it, a small merchant might expect a fee of about 2.5% per transaction. PayPal offers convenience (no payment gateway of your own required), and charges a higher fee because of it.
Some examples that happen with Internet businesses, and have become common with others, would be recurring monthly fees that automatically kick in if the buyer does not ask for them to stop when signing up for a free trial. Some companies do this because a lot of people simply pay the fees (not checking their statements in detail), but chargebacks will increase as some people will not even ask to have the charges stopped before they start a chargeback claim.
In Canada, some credit card companies will not support a buyer who uses PayPal. Mastercard, for instance, will ask if you knew you were paying for something via PayPal. If you say yes, then they defer the case to being between you and PayPal. The USA is better at supporting cardholders.
If PayPal is now charging merchants a chargeback fee for bad transactions, and perhaps they always have been, you can bet it's more than a commercial gateway would charge. That's one reason PayPal makes good money - simpler to use, but higher fees all around than other options.
That's probably too much info. Glad you asked?
A chargeback happens when a buyer initiates a claim with their credit card company for one of several reasons, such as, they don't recognize a charge on their card, they never received the good or service promised, etc.
The onus is on the merchant to prove the transaction did occur with the knowledge of the buyer, or the product was received as promised etc.
If, within a designated amount of time, the merchant cannot prove the transaction was valid, which sometimes requires a signed statement from the buyer, then the credit card charge is reversed, and the merchant is charged a fee by their credit card company for the bad transaction in addition to losing the funds from the transaction.
Too many chargebacks, and the fee (% of sale) the merchant pays to the middle man or bank who handles the credit card transactions can go up for every transaction. When I was doing it, a small merchant might expect a fee of about 2.5% per transaction. PayPal offers convenience (no payment gateway of your own required), and charges a higher fee because of it.
Some examples that happen with Internet businesses, and have become common with others, would be recurring monthly fees that automatically kick in if the buyer does not ask for them to stop when signing up for a free trial. Some companies do this because a lot of people simply pay the fees (not checking their statements in detail), but chargebacks will increase as some people will not even ask to have the charges stopped before they start a chargeback claim.
In Canada, some credit card companies will not support a buyer who uses PayPal. Mastercard, for instance, will ask if you knew you were paying for something via PayPal. If you say yes, then they defer the case to being between you and PayPal. The USA is better at supporting cardholders.
If PayPal is now charging merchants a chargeback fee for bad transactions, and perhaps they always have been, you can bet it's more than a commercial gateway would charge. That's one reason PayPal makes good money - simpler to use, but higher fees all around than other options.
That's probably too much info. Glad you asked?
Edited by Osiris
09/05/2014 11:49 am
09/05/2014 11:49 am
