Quote:
Originally posted by HairToStay
It's extortion and it's not fair in any sense of the word. Neither Visa nor the banks lose ANY money on chargebacks, yet they claim they need these fees to make up for their losses.
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Wrong.
Quote:
Originally posted by HairToStay
In the event of a chargeback, the originating charge is eaten by us, the merchants. The chargeback fees -- ranging from $25-$100 - are eaten by the merchant. How does Visa or the bank lose money?
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When a chargeback occurs, there are two banks involved. The issuing bank (the cardholder's bank) and the acquiring bank (the bank that processes the transaction).
In both cases, there are associated fess for a chargeback. Including, but not limited to, paperwork and employees' salaries.
The average cost of a chargeback on each side is $25 US. The issuer eats up those fees and only charges an average of $2 to the customer in case the chargeback is NOT resolved in the customer's favour.
The acquirer passes the fee on to the merchant being chargedback, ie: your processor. Your processor passes the fee on to you.
In most cases, the transaction will be written off by the issuer if it's less than $15-$25 US. That amount can vary based on the customer's standing with the bank and the type of transaction.
So yes, the issuer loses money. Since the definition of a high-risk merchant is someone who is at a high-risk of a chargeback, there are fees associated for said merchants. Completely fair and not extortion.