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Old May 20, 2016, 18:46   #1
JohnnyJohnsoninWI
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First Lesson with a Merchant Account Provider

As a small business person, I set up a merchant account so I can accept credit cards and sell online. Here's what happened this Spring. 1. I sold a FAL receiver lock online with credit card. 2. A month later, I received notice from my merchant account provider that the customer never authorized the payment. 3. The merchant account provider immediately pulled the $35 out of my account and returned it to the customer. Plus, they withdrew an additional $15 from my account, I guess, for causing trouble. 4. My merchant account provider said I could dispute the transaction by providing evidence, that they would in turn forward to the customer's bank and that I should hear something in 6 to 8 weeks. 5. I disputed the transaction by providing a copy of the invoice and shipping documents. 6. Six weeks later, my dispute was dismissed. 7. In the rejection notice, the merchant account provider said the cc was stolen and also that banks typically don't even investigate disputes such as mine; they just dismiss them.

So, if a customer's credit card is stolen, as a vendor, I'm out the sale plus a $15 penalty,,,,just because the merchant account provider can take it.

Hopefully, there is more that I can learn from this. I'm asking you to help me understand how cc theft and fraud works. For example, let's say Bob steals Fred's credit card. How can Bob use it online? I mean, he still has to use Fred's address. How would Bob intercept the shipment "USPS" before Fred actually received it?

I can see someone trying to buy an Iphone or some other popular commodity gadget, but, seriously, how many people are going to steel a cc and use it to buy parts for their FAL?

How can I better protect myself from these scenarios in the future?

Are there better Merchant Account Providers?

Lastly, I don't know if my "customer" is a member here, but I'd like to thank Darrell P. from Fort Bragg, CA for the first half of this lesson. If he is a member here, I'll happily provide his last name so you can all beware of him, too.

Thanks,

John
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Old May 20, 2016, 18:54   #2
L Haney
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Quote:
Originally Posted by JohnnyJohnsoninWI View Post
I'm asking you to help me understand how cc theft and fraud works.
You, as a small business, will eat it. You WILL be shit on by the folks who have big money invested in moving money. You do NOT have big money invested in financial transactions and as such will provide money to those that do. They will spell this out in contracts you WILL sign before they trifle with you.

It's pretty damn plain unless english is a second language for you.

I know that sounds harsh and perhaps unkind. I do NOT
mean it as such. But today, it is the truth.
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Old May 20, 2016, 19:04   #3
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Quote:
Originally Posted by L Haney View Post
You, as a small business, will eat it. You WILL be shit on by the folks who have big money invested in moving money. You do NOT have big money invested in financial transactions and as such will provide money to those that do. They will spell this out in contracts you WILL sign before they trifle with you.

It's pretty damn plain unless english is a second language for you.

I know that sounds harsh and perhaps unkind. I do NOT
mean it as such. But today, it is the truth.
About sums it up...

I don't mean that to be unkind either...

Forrest
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Old May 20, 2016, 19:19   #4
JohnnyJohnsoninWI
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Oh Man! Say it like it is, Mr. Haney!

I agree with everything you said. However, somehow, small business people stay in business and make a living. They get savvy.

Help me become more savvy with these transactions. Do I just forget about the credit cards and demand postal money orders? I've always believed it was important to make it easy for customers to spend their money.
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Old May 20, 2016, 19:52   #5
Drtrumpet
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How long have you been doing this? A transaction going south like that is not common in my experience.
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Old May 20, 2016, 20:52   #6
JohnnyJohnsoninWI
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How Long

That's a good question, DrTrumpet.

Not very long. 8 months or so with relatively few transactions. Unfortunately, I don't enjoy the benefit of a large database from which to base my perspective. Right now, one bad transaction represents a noticeable percentage and I wonder if that's what I should expect going forward.
I read about average % loss due by retailers due to shoplifting and employee theft and wonder if that's just the way it is.
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Old May 21, 2016, 01:46   #7
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If you accept credit cards you will see loss every month. All of my friends that do it complain all the time about ho hey were scammed.

Ill never accept credit cards. May miss sales over it, but I won't get screwed either.
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Old May 21, 2016, 05:18   #8
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I have been in business for 10 years. I have debated whether or not to accept credit cards. I have hesitated because of these very types of scenarios. I wasn't sure how prevalent they were, but now I'm pretty sure I'm over my curiosity. I have only been burned once or twice in 10 years, and nothing of significant value. I have enough to worry about with getting burned by the customer. I do not need to worry about the cc provider as well. Thanks for sharing.

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Old May 21, 2016, 06:02   #9
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Paypal works the same way
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Old May 21, 2016, 06:25   #10
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Paypal worked like a dream until they phukked me over. The anti-gun policy was just icing on the cake. Noe moe paypal for me!!

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Old May 21, 2016, 10:27   #11
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Papal are criminal scum. I'm much happier with credit cards. The only advantage to paypal was having the USPS label generated for me, but their criminal fraud I cannot abide.

I use Payment Alliance International for my processor. Gun friendly, NRA endorsed.

I use eProcessing Network for my virtual germinal. I used to use commercial software, but they screwed me by stopping supporting it every couple years and forcing me to purchase the new one. ePN is $15/month plus transaction fees.

The hard part about credit cards is that you have fixed monthy fees, and then per-transaction fees. If you do zero transactions, you still have your monthly fees (you lose money). I input all my fees into a spreadsheet to track, and so I can determine if I charge enough as a CC surcharge.

The fewer transactions, the higher a percentage of your gross, that are processing fees.

As a small mail order business, you kindof need to accept CC to build your market. But until you do, your CC expenses will be high.


For example, combining ALL fees from both ePN and PAI, my CC expenses were on

$700 in transactions - 7.75%
$1800 in transactions - 4.55%
$2500 in transactions - 3.5%


I charge 3.5% surcharge for CC, but if I make less than $2500, I eat the difference. If I make more than $2500 in a month, rate drops to about 2.8%. My annual average is 3.3%. Add in the admin cost and I really need to bump from 3.5% to 4% just to break even.

As to your chargeback. If you have the card number, and the CVC, and the billing and shipping address are the same, and you have delivery confirmation - the customer lied. The card holder's bank needs to eat it. But the CC processor pays by ACH - you can approach your bank and see if they will reverse the charge on the same evidence. You might cancel with that processor. As I did with PayPal. I did thousands of dollars in transactions with them every year, they made hundreds of dollars in fees. I'd been with them ten years. They stole $65 from me. My bank got it back, but I am done with them.
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Old May 22, 2016, 23:06   #12
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Incidentally, PCI Council rules pretty much states that merchant gets rimmed no matter who is wrong. After all,

1. Banks can't lose money since they run the council
2. Buyers can't lose money otherwise they will use something else
3. Only thing left is the merchant.
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Old May 31, 2016, 04:30   #13
evan price
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Quote:
Originally Posted by JohnnyJohnsoninWI View Post
Hopefully, there is more that I can learn from this. I'm asking you to help me understand how cc theft and fraud works. For example, let's say Bob steals Fred's credit card. How can Bob use it online? I mean, he still has to use Fred's address. How would Bob intercept the shipment "USPS" before Fred actually received it?

I can see someone trying to buy an Iphone or some other popular commodity gadget, but, seriously, how many people are going to steel a cc and use it to buy parts for their FAL?
John: Sucks to be in that situation. There are two primary means of fraud in this situation: Thanks to modern tracking of shipments, the thief knows the package is enroute and out for delivery so they just hang out, wait for the mailman and then take the package. Typically this would be some higher end stuff that can be shifted easy in the streets.

Since this is a rather specific piece of hardware that isn't really "high value" I think you have the second type of fraud- a "STOLEN" card.

All that stuff I bought online? Uh, not me, my card was "stolen". And the fact that it wasn't reported stolen until after the stuff was shipped was just a coincidence....

The system is rigged against the merchants.
In the end you are out your merch. Maybe you recover something. Maybe not.
Thanks to EMV Europay chip technology, the burden of fraud is 100% shifted to the merchant, not the bank, not the provider. They wash their hands.
The theory is this was supposed to get the big merchants to get serious about fraud. When you have people going into Walmart and spending thousands on gift cards and iPhones on stolen cards every day and the clerks don't even look at the card- because hey, it's not their problem, right?- they have a point.

The guys getting screwed will be the ones that are small, and the smaller the more screwing they will get because they are doing mail-order, they are doing casual sales without a chip, etc.
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