[newobj]

The idea of a flat charge back fee is weird[1]. If I think about a store where I sell things for $1, it means if I exceed a 7% chargeback rate, my business is no longer profitable. Is that really all there is to it?

Edit: [1] Not weird as in weird on Stripe's part, but weird as from the perspective of someone who does not sell online, just seems like this one-size-fits-all approach probably makes a lot of low-margin selling really hard.

[kjackson2012]

Credit card companies charge at least $15 per chargeback, which makes dealing with small charges very unprofitable, especially with credit card thieves using small purchases as tests for valid credit card numbers.

A 7% chargeback rate is huge and would likely get you shutdown by your credit card processor.

[sachingulaya]

7% chargeback rate?

Out of ~2500 orders I've had one chargeback and it was our fault for not processing the customer's refund sooner. I'm not open to disclose what we sell but I can promise you that I have some very angry customers.

Maybe you're confusing refunds with chargebacks?

[Osiris]

I've experienced a lot of chargebacks, unfortunately. For some reason some gang of people from Vietnam keeps using my site to verify stolen credit cards work. Originally this all happened through a third-party service which I had no control over (I couldn't preemptively block suspicious transactions). I switched to Swipe and eventually saw the same fraudulent transactions coming through (one was 50 charges with the same card with a minute of each other).

Sick of it all I finally got minFraud setup and working with Braintree as the payment processor. So now, I use Braintree to authorize the card, then do a fraud check through minFraud. If the fraud level is low enough, I submit the payment for settlement, otherwise I void it.

Since putting minFraud in place I haven't had any chargebacks.

[line]

Why not do the minFraud check before auth? Won't that save you some auth fees?

minFraud is a very cost effective service. We have them as one of the solutions in our platform.

[Osiris]

There's no fee for an authorization. That's just the check if the card is valid. The fee comes from submitting the charge for settlement.

[URSpider94]

The effort to handle a chargeback is not proportional to the amount of the charge, so I don't see why the fee would be.

If you read around on retail forums, you'll find that nobody would be able to get away with anything close to a 7% chargeback rate with traditional credit card processing, without getting their merchant account terminated with severe prejudice -- anything more than a percent or so raises alarm bells with the card companies.

[jcoby]

7% chargeback rate is insanely high and I wouldn't be surprised if your merchant dropped you. Realistically anything over 0.5% and you're doing something wrong and that's even a magnitude higher than what I would shoot for.

Also, selling at $1 you're only going to make $0.67 or so per transaction (maybe less depending on how you get bilked in fees). You're going to have to do a lot of volume to make money selling at $1.

[pc]

As others have pointed out, a 7% chargeback rate is pretty problematic -- the card brands (Visa and co) will intervene long before then.

[line]

It depends. Its not always just about the ratio of chargebacks but also volume.

So you might trigger some flags with the card associations if you say have the following

1) 1% chargeback ratio 2) 1% of revenue result in chargeback 3) Have like 50-100 (forget exact number) of chargebacks a month for like x consecutive months.

If you don't fix the problem, then bad things happen like additional fines....etc.

So for merchants with very low volume, a higher chargeback rate is sometimes permissible. Acquiring banks have their own risk assessment so they may allow it or may not.

[URSpider94]

Reading your edit -- yes, low-margin retail is -HARD-, for a lot of reasons that people don't really get until they try to do it.

[jareau]

Even "someone who does not sell online" (i.e. a low-margin retailer) has to pay a $15+ chargeback processing fee to the ISO/processor/networks.

[gesman]

If you sell 10 crappy $1 things a month it doesn't make sense. If you sell 10000 nice $1 things a month - it does.