[Danski0]

It was a SaaS subscription with mostly companies as customers. We didn't brake any ToS, Stripe refered to a high chargeback rate (1-2%) and that was it. Something about SaaS being high risk and getting close to 2% chargeback could loose Stripe their contracts with MC/VISA. In reality no fucking risk as we had a 100% refund policy, no questions asked, no time limit.

[dangrossman]

This is confusing, so apologies if I'm misreading. Your policies are irrelevant if you're getting chargebacks despite them. Stripe was not lying: they are mandated by Visa/MC and whatever processors they work with to keep their chargeback ratio lower than that. If large customers like you can't keep your ratio below ~1%, then they have to drop you to preserve their own business. Having a high chargeback rate is itself a violation of the TOS.

If you really were getting 2% of your payments reversed despite a 100% refund guarantee, there's really something wrong with that business that needed fixing. Perhaps uninentional, but people were being misled in some way, or claiming that refund was too difficult, or contacting you and getting a prompt response too hard. I run several SaaS businesses, with $MM total revenue, and had 3 chargebacks total last year adding up to less than $500.

[Danski0]

People missunderstand me a bit, I'm sorry if I wasn't clear. I liked stripe and still use it for some sites. I have no problem that our 1%+ chargeback was an issue for Stripe who have to keep Bank/VISA/MC happy. Also, it's ok that they didn't want us as a customer. Stripe has as much right as any other business to choose their rules and customers. I just told our story as a complement to the creator of this thread for other users of Stripe to know what could happen. Stripe is not a golden bullet for credit cards online as often told in the tech community.

Now, what did bother me enough to comment at all?: 1. We always send in detailed papperwork for each chargeback. Never heard back for any of these during our time as a customer. Not once! 2. We never got any indication that we were getting close to some limit resulting in being cut off, just the email saying byebye in 10days (or whatever it was, maybe 7?) just as everyone in the office went on a 4 day holiday (bad luck I guess). 10 days is not even close to enough to set up with a new processor for SaaS-products if you need an import of old customers and have any to speak of amount of charges going on. It triggers a lot of extra papper work. 3. Payment processors claim SaaS is high risk as there is no product for proof of delivery. Stripe has all our money for months and a full refund policy makes it low risk in my eyes. We pay extra for this hassle anyway. If they say it's a risk, ok, Stripe knows better I hope. We had very long going ID identification so fraud was never the issue, just people trying to get money back and ashamed of asking it from us directly. 4. Stripe dealing with 1mil+ euro yearly of our money and refusing to speak on the phone even regarding major issues. Emails with "tough" questions always disappeared into thin air. It feels weird to not being able to contact someone that have your balls this way.

PS: Our "high" 1-2% chargeback spiked sometimes as customers that had made 10+ transactions during a year could start a chargeback for all transactions. Never spiked above 2%. Also, the product attracted many lazy and not-so-tech-savy-people, very far from the typical tarsnap user (which I'm a long term user of). Not defending our chargeback-rate, just that we know why as we phone up each user after a chargeback to get an understanding.

Long comment, hopefully it clears out my thoughts for those interested.

[codexon]

I have trouble believing even a 2% chargeback rate would endanger Visa/MC.

It seems like they hardly spend any time investigating chargebacks and most disputes seem to be won by the buyer by default unless they have a habit of filing chargebacks.

[dangrossman]

The reason Visa/MC so rigorously enforces those ratios has nothing to do with immediate financial danger from the reversals themselves. They bear no actual risk there.

Visa/MC work with an ever-changing mix of tens of millions of merchants that they never have direct contact with. There's a long chain of banks, ISOs, MSPs and other resellers between the card networks and the businesses that accept cards, yet they still need to provide some kind of oversight to avoid working with businesses or business models that would damage the integrity and trustworthiness of their brand with consumers.

The only way they can do that is to have policies that create incentives for the behavior they want to promote, and that prevent the behavior they want to discourage. The mandate to have a reversal ratio under 1% is one of those policies. Because it's enforced at the top, it trickles down the pyramid to every single business accepting credit cards even though they never directly interact with Visa/MC. Anyone with any kind of business that leaves customers dissatisfied, whether it's due to fraud, abuse, incompetence or ignorance, will end up being excluded from the network until they can rectify their issues despite Visa/MC never knowing they existed.

[codexon]

And unfortunately it is encouraging poor behavior from customers to be able to get things for free.

I think everyone can agree that maybe with a 20% chargeback rate, there is something wrong with the business but 1-2% seems possible for a legitimate business.

As a credit card user, I don't think it is their job to dictate which businesses are worthy of operating or not.

As long as I get my money back when I do a chargeback, then they did their job.

[dangrossman]

> 1-2% seems possible for a legitimate business

Somehow, all the businesses that currently exist and accept credit cards are doing so without more than 1-2% chargeback rates. That's a pretty good indicator that this isn't a problematic level to set the bar at. It's really much higher than you seem to think. 1 in 50 people walking into a store shouldn't have some payment problem so serious they have to go to their bank instead of the store to resolve it. Neither should online sellers be generating chargebacks every single day; 50 sales a day is a very small business. If 2% were an acceptable level, Wal-Mart would be allowed to generate 300,000 chargebacks every day, millions per year. 300,000 people who have a problem with charges on their credit card per day at a single retailer would clearly not be good for Visa or MasterCard's brands.

> As a credit card user, I don't think it is their job to dictate which businesses are worthy of operating or not.

As a credit card user, don't you prefer that you don't have to call your bank and dispute a transaction on a regular basis? It's this bar that ensures bad actors aren't there to take your card in the first place, that the stores you shop at don't engage in shady practices resulting in charging you more than you expected to pay, that they have reasonable return/refund policies, and that they have good and prompt support so they can resolve issues with you directly without you going through a third-party mediator.

Ensuring low chareback rates ensures high customer satisfaction rates across millions of businesses. If a business wants to operate despite large numbers of dissatisfied customers, they're free to do so. They can take cash, or checks, or debit your bank account. They just won't be allowed to take Visa or MasterCard cards. That's not a right.

[codexon]

> Somehow, all the businesses that currently exist and accept credit cards are doing so without more than 1-2% chargeback rates.

Citation needed.

https://www.quora.com/Online-Payment-Gateways-and-Processing...

"Amount over $2400-$2500 mark suddenly experiences a surge and it is almost 3.0% to 3.5%"

I have personally had times where my chargeback rate has been above 2%.

Being able to accept credit cards is more of a right rather than a privilege given how much of a monopoly they have and it is virtually impossible to accept payments online through any other means.

I take it you are in favor of credit card companies being able to block payments to arbitrary entities such as wikileaks?

[adrr]

2% is very high. MC/Visa require you to keep your chargeback rate under 1%. If you go above it you'll get add to their excessive chargeback program which if you don't get out after after certain amount of time, you'll be fined up to $50k a month(volume dependent) . Go above 3%, you get yourself in audit program and risk losing your merchant account.

We do ecom subscription and ours is 0.01% in comparison.

If you blame the customer, you should better qualify your customers. There are services that can tell you if the customer has committed friendly fraud(fraudulent chargebacks). Burden is on the merchant to prevent chargebacks.

[ebspelman]

Where do you think the refund for a chargeback comes from? With a 3rd-party aggregator like Stripe, it comes directly out of the merchant's Stripe account (i.e. Stripe's aggregated account with Chase Paymentech). If the merchant has already withdrawn all of their money from their Stripe account, then Stripe is left holding the bag.

Accounts with 1-2% chargeback rate are incredibly costly. Stripe is potentially having to pay 1-2% of that account's entire processing volume in losses.

Chargebacks don't magically get paid. Somebody is left holding the bill.

[codexon]

If a payment is reversed, fine. The buyer got all their money back.

But adding a $25 "administrative fee" or a $10,000 fine seems like a frivolous act, given how little effort is spent investigating chargebacks.

[damoncali]

What sort of SaaS product has a 2% chargeback rate? That's huge.

[cperciva]

That's what I was wondering -- Tarsnap may be an unusual case, but out of over 10000 transactions I've only had one chargeback... and I won that because it was initiated by accident.

[pbiggar]

Agreed. CircleCI has had one chargeback ever. It was $19 and by a long-term customer who didn't do a chargeback for any other month. We assumed it was an accident, but didn't contest it (not worth it).

[dennisgorelik]

Why not ask your customer why they did the chargeback?

It could help identify some hidden problem and as a bonus make them cancel that chargeback.

[pbiggar]

I think it looked like an accounting department had made the chargeback, which implied an accident. It could have been a hidden problem but it didn't strike us as the highest priority one (we've plenty of problems people are telling us about that go higher in the queue :))

[ebspelman]

1-2% chargeback rate is the exact opposite of 'no risk.'

This is why people will eventually end up hating Stripe just as much as PayPal. There is a huge disconnect between consumer expectations and the realities that a 3rd-party aggregator like Stripe faces.

[pbreit]

Apparently there was more chargeback risk than you are suggesting. If you are so customer friendly with your refund policy, you should do a bit more work upfront before refunds are necessary. That's all.