Originally Posted by HairToStay

I belong to a few associations for credit card merchants and am constantly amazed at the games Visa/MC play.

Fraud happens with tangible goods as well, as that's a huge portion of my income. I remember one customer who ordered 3 videos and they were shipped to him via UPS, weight of the package was 3 lbs. When he got them, he didn't like 2 of them and sent them back. I explained my "no return unless defective" policy that he CLEARLY checked off and agreed to, and I refused to issue a refund since he watched all videos.
He issued a chargeback for the full amount.
I showed proof of delivery by his signature, proof of weight of the package that was sent to him, yet he told his credit card company he returned all 3 videos. I had proof that his package, shipped to me by the USPS, weighed exactly 2 videos-worth and that was it.

In order to fight the chargeback, I would have had to pay a fee of $400 whether I won or lost.

In another situation, I noticed a higher discount rate on several transactions and asked why. They were debit cards, and they process those at a higher rate. The problem? Somone giving me a credit card number online or over the phone doesn't differentiate to me if it's a debit card or not and there is no way to know by the number. So I lose another 1.25% of each sale if it's a debit card.

You said Visa/MC can shut you down at any time. What's worse is they can put you on the TMF (terminated merchant file) and after that, basically, you can never, ever get another account.