I'm not sure why this guy had trouble understanding that he needed money in his account as collateral against the charge back. "Yeah, he'll probably send us the money if the charge back is upheld" is not a sustainable policy.
Agreed. Square's policy seems clear. Since Square pays out transactions very quickly, it's essential to be able to recover funds when there are questions. Merchants need to anticipate this. The alternative is Square holding the money for a long time, which nobody wants.
Clearing funds at any time (not just on business days), as Dwolla proposes[1], will mitigate some aspects of the OP's concern.
It appears to me that Square's service is superb and prompt, especially when compared with a traditional credit card processor that won't even accept email inquiries.
A downside of being so easy to use is that many people who have no clue what they're doing are probably using Square. I don't know how to solve that, since adding education (hassle) up front would definitely drive away some fraction of customers.
Had Square told him in their FIRST email, things would have been fine. The problem wasn't so much that they took his money (he immediately transferred money into the account) the problem was that Square was accusatory and slow to respond.
They did tell him in he original email. " There will be a hold or debit (via your bank account) on this transaction until the dispute is resolved"
And this is exactly how merchant accounts work. the only thing square might be guilty of is not fully clarifying this with their customer base as their base is mostly unsavvy in this realm
I'm not sure why you think it is a good idea to let random outside parties dip into his business's working capital?
Ooops sorry about withdrawing $10,000 instead of $100. What's a decimal place among friends? Hope you can still make that tax payment and payroll while we futzy around on our end.
The alternative isn't "not dipping in working capital", the alternative is "freezing all received funds for a month, all the time".
Chargebacks happen; and you shouldn't expect that you will get paid for 100% of your sales. Deal with it or don't accept credit cards - the rules of the credit card game favor the cardholder a lot, that's why customers want to use their cards.
The policy is clear, and based on other comments here probably mandated by the payment networks, but that doesn’t mean it’s reasonable.
It’s perfectly reasonable to expect merchants to be prepared for chargebacks and have a buffer for that. It would be reasonable to have a few days’ notice to pay the money, or be able to designate a different account for them to debit the amount from, or submit a credit card that Square can draw from as security.
But if you are expected to have a month’s sales in the Square-linked bank account all the time, how is that different from simply “freezing all received funds for a month, all the time”?
You are not expected to keep a month sales, just some small percent that will vary by your customer's tendencies to chargeback. Since almost every merchant account will have some chargebacks, and high volume ones will usually have some persistent level of funds in chargeback limbo, having some billing process to ask for funds is expensive and unnecessary. And what would happen when Jason refuses to find his account because he didn't agree with the chargeback?
Yes. A credit card processor that said they wouldn't act while he was disputing a charge --- but oops did. A credit card processor that makes it hard to contact them. A credit card processor that cannot be bothered to pick up the phone and call the customer.
Clearing funds at any time (not just on business days), as Dwolla proposes[1], will mitigate some aspects of the OP's concern.
It appears to me that Square's service is superb and prompt, especially when compared with a traditional credit card processor that won't even accept email inquiries.
[1] http://blog.dwolla.com/ach-goes-real-time-with-fisync-free-f...