Various types of high risk merchants need to be aware of the difference between chargebacks and refunds. The best high risk processors will offer high risk merchant accounts that acknowledge these kinds of risks but still treat them fairly. First, let’s start from refunds. Chances are you already have a good idea of how refunds work, since most of us have had to ask for one from a business at some point in our lives:
Refund – A refund occurs when a customer asks for funds to be returned to the customer’s credit card and the merchant agrees. This usually occurs when the customer returns goods, or the merchant fails to provide goods or services for which the customer has paid.
Partial refunds typically occur when a customer has been provided goods or services, but is unhappy with them, or a particular element was never provided.
Chargeback – A chargeback happens as a result of a dispute. Typically, the cardholder disputes a charge on their credit card statement with the bank that issues the card. This can happen as a result of:
- Fraud: The card was used without the customer’s authorization.
- Failed Refund: The customer attempted a refund through the merchant, but the merchant either failed to respond or refused to provide the refund.
- Inaccuracy: The goods or services that were provided were misrepresented to the customer.
What are High Risk Merchants?
Many types of high risk merchants must pay particular attention to these elements because they can reduce the number of processors willing to give you a good deal on your payment processing.
Businesses that see a high number of refunds and especially a high number of chargebacks can very quickly be labeled high risk by payment processors. This is because chargebacks serve as a red flag that a business is either failing to provide refunds or is misrepresenting their goods or services.
There are many high risk merchant accounts, but they’ll often charge you much higher rates and fees than you should be charged. The best high risk processors will reduce these rates as much as possible, and will specialize in these types of accounts.
With more than thirty years of payment processing experience, Y2Payments can help you save some of that money from your current statements and have it go directly to your bottom line! Contact us today to learn more.