Hi All

I have been playing round with some ideas for a couple of website that will offer products which would need people to pay by credit card and then the product is shipped to them.

The problem i have with this is that the product i will be offering would make approximately 30% profit margin's, which is fairly good for what i am selling. Once you take the Credit Card processing fees in to account you can probably take 5% out of that i beleive.

The problem i am facing is that i have seen many peoiple write about and articles discussing the issue of chargebacks. Now i can understand there are legitiment reasons for chargebacks in some cases, but the main thing i have read about is chargebacks for people who have purchased a service then used it and get to the end of go it woasnt worth what i paid for it.

Now i am selling a physical product which costs me a certain amount to purchase from my supplier, so once i receive payment and send the goods i want to be sure the money isnt just going to disappear because somone didnt like what they got even though they ordered it. I guess for services like web hosting this isnt as big a problem, but for physical goods that have a fixed price you pay it could make the cost of chargebacks hard to absorb.

Do you think this is really as bigger problem as i am seeing it as or do you beleive chargebacks are not and issue at all. Also is their anyway to prove somone requested somthing and accepted the charge by not getting their signature on the credit card receipt?

thanks for any help anyoine can offer.

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Joel Brown - Orion Networks
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Thanks for the reply Matt.

I guess it shouldnt be a problem high on the agenda. I am wondering though if a possible solution could also be require a signed authorisation. Eg when they complete the order they are requested to print a page which states that they accept charges to their Credit Card, and it needs to be sent to me before the order is processed or charged to their card. This would need somthing like the discount of the postage off their final order or somthing like this.

On another note do any Australia User know of or have had any experience dealing with a payment solution providor called Stratapay. I am considering using theire services for my credit card facility as well as other payment meathods they offer also.

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Joel Brown - Orion Networks
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I sell real products online daily. I sell only from my own sites and only with credit cards through my own gateway. No paypal, although I will take it if someone asks. I'll also take checks in the mail.

I'll get one or two chargebacks a year. Since I run several sites charges through a single merchant account, which is not named after any of the sites, every once in awhile someone will forget ordering or receiving something. In general, all it takes is a phone call to the person. "OH yeah, I got that!" End of chargeback.

I got into one go-around with AMEX. Guy bought about $ 350 worth of birdhouses from me. Got confused on the name. I got a chargeback from AMEX, thought it was not a big deal, so I got the FedEx info and faxed to them. They turned it down - because the FedEx driver left the goods without getting a signature.

In the meantime, I talked to the guy. He said he'd call AMEX and tell them to drop it. They'd already taken the money back from my bank. So he mailed me a check, which I deposited. Maybe 4 months later, AMEX puts the money back, so I end up sending him a check back. A whole lot of bother and phone calls, but no money lost.

I've never had a problem with fraud. Never had a chargeback stick. Of course, if someone complains about an item, I tell them send it back and I'll issue credit, which I do. As long as you've got proof of delivery, you don;t have to worry much. And some gateways have the deal where they get the 3 number code on the back of the card, which makes it imperative that the card is present when making the purchase, not just numbers picked up off a receipt or on the net.

orion_joel

here's a statistic that might make your mind up for you:
""Census Bureau reports retail e-commerce sales have increased steadily since 1999, to just under $16 billion per quarter from $6 billion.""

What I would suggest is to break down all the fees to a per transaction cost and add that to your retail price, It will be much less than you expect I'm sure. Let your customers pay for their own transaction just as they pay for their own shipping, the added cost of the product is so minimal to them but increases your profit margin considerably over time.

As mvd and pete said, most chargebacks are due to fraudulent charges (owners of the card not making the purchase). Some gateways have double protection against fraud for their users - meaning they have their own fraud detection system in play as well as the banks. This helps keep you safer from fraudulent chargebacks.

You might be eased a bit to know that product sales have VERY low chargeback rates overall, its usually non-product subscription based sites that cross sell other items to users without their understanding that run closer to 1% cb rates.

Now with all this information I say good luck and get to selling mister! lol

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In addition to fraudulent charges, I have had the odd charge back as a result of the customer not recognising the merchant name on their credit card statement.

Keep in mind that people do not bother to read the fine print, so state clearly on your ordering page the merchant name. It also helps to put a reminder note on all invoices etc.

Karen

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There are always a few things that you can do to help prevent chargebacks, like verify the IP address, call the customer, etc. We have been recommending FraudGate to our customers. They do all of this & it has helped cut back on fraudulent orders.

Of course - it all depends on what you are selling & to who you are selling it to.

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I have had a lot of issues with chargebacks when I started doing business. I had a lot of fraudulent customers who claimed that they never authorized a charge from my company just so they could scam me and never pay for the service. Since you are selling products, make sure you keep all your shipping records. Now I request a prepayment on my new customers + if they are in good standing for the next few months, I will just invoice them.

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I agree with the above advice of not letting fear of CBs keep you from starting your business or accepting credit cards. The thing is no matter whether you use a CC merchant account or PayPal it won't stop chargebacks from happening. PayPal merchants have the same issues with chargebacks as direct CC merchants.

The bottom line is that the statistics consistently show that your chances of having even 1 chargeback case per year is minmal. Even then, so long as you are legit, the chances of you actually losing that 1 or 2 chargeback cases is small. Say you have bad luck and lose 2 chargeback cases per year. Compare that with your net profits for the year since you began accepting credit cards and you'll be glad you decided to accept them.

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Look at the last table. In 1999 78% of all sales online were done via credit card. I know that Paypal is huge, but even they have started accepting credit cards outside of their normal sign-up.

http://www.digital-crossing.com/e-co...statistics.htm

paypal was a good choice for me to start with. i can use the paypal website as a shipping center... it works out ok but it does cost a couple percent more. I think taking credit cards, especially online, is an absolute necessity. I will switch in the future but for now the couple percent is not hurting me. I just taught myself how to build sites and i have no real training so take the preceeding as the uneducated opinion that it is.