Introduction To The Problem of Fraud and Chargeback
"CNN recently reported that the big travel site Expedia.com suffered losses of $4.1 million in credit card fraud."
While most people think that the victims when it comes to credit card fraud are the customers, this is very untrue. Neither are the credit card companies the victims. The real victims in most cases of credit card fraud online are the online merchants.
According to Better Busines Bureau, "this is because for the credit card owner, you are usually only liable for the first $50 of fraudulent charges.
Many credit card companies will waive this liability entirely when a fraudulent charge on your credit card is reported promptly. Contrary to popular belief, the credit card company does not suffer the loss in most cases. Our local merchants and service providers do"
If you are a online or offline merchant you will find the following information not only very revealing but also extremely helpful.
The ways in which merchants lose money in such fraudulent credit card transactions are two-fold.
First, you as a merchant lose money because the product or service ordered has already been sent or provided.
Second, whenever there is a chargeback demand, your bank charges you a chargeback fee of US$ 10 and upwards per transaction.
A relevant example will throw more light on this...
... if on your website you sell a book for $20 through a credit card transaction and the cardholder later contests the sale, you will end up paying your bank the $20 PLUS a chargeback fee of $10 and upwards.
And by the time you you add the amount that it cost you to mail it to this the cost of the ebook, you will find out that you have lost far more than you thought you gained on that sale initially.
Many banks, these days, even ask for a sizable deposit to protect themselves in the event that YOU, as the merchant, is unable to cover the chargeback costs at the time they occur.
The worst thing about this chargeback problem that online merchants face is you, as an online merchant, incurs too many chargebacks. When this happens, you stand at a great risk of losing your merchant account completely.
Once you've lost your merchant account you are placed on the Visa/MasterCard Terminated Merchant File (TMF/MATCH list) for several years which all Merchant Account Providers have access to. And if they find you on the list they will not reissue a merchant account to you.
So, at the end of the day you as the online merchant has lost in two ways. Both the fraudsters and the credit card providing banks have made profit at your expense.
Read on and in other chapters of this ebook, you will know what chargebacks are and what you can do to protect your online business.
Next Chapter
Nigerian Scammers' Involvement in Credit Card Fraud
