How to reduce chargebacks with a High Risk Merchant Account

Chargebacks are a natural part of doing business when you're in high risk industries. If you're travel, subscription, nutraceutical, or adult entertainment, too many chargebacks can endanger your merchant account status and eventually your business sustainability. The good news is that there are resources and techniques with specialized high risk merchant accounts that will help you fight back. Here's how to use your high-risk merchant account to keep chargebacks under control and defend your payment processing capacity.

Understanding High Risk Merchant Accounts and Chargebacks

High risk merchant accounts are tailored to fit companies that operate in high-chargeback industries, high-regulatory-complexity areas, or have reputational issues. Even if the accounts require more fees, they offer special services to handle the peculiarities of high-risk merchants—most importantly, chargebacks.

The typical chargeback threshold for the majority of payment processors is a 1% threshold of transactions. Going over this will result in account reviews, increased fees, or even closing. More flexible high-risk merchant accounts are usually available, but proactiveness in strategies is always important.

Successful Chargeback Reduction Tactics

1. Use Sound Fraud Detection Tools

High-risk merchant account providers have advanced fraud detection features. Use all of the following:

• AVS (Address Verification System) matching to check billing addresses

• CVV validation to verify the cardholder is in possession of the card

• Velocity checking to mark suspicious behavior, like repeated failed transactions

• Device fingerprinting to recognize devices with prior fraudulent activity

• Geolocation filtering to reject transactions from high-fraud locations

2. Make Clear Billing Descriptors

Chargebacks happen far too often simply because customers are not familiar with charges on their statements. Make your billing descriptors:

• Recognizable and contain your business name

• Consistent on all transactions

• With your customer service telephone number wherever feasible

3. Create Thorough Documentation Procedures

High risk merchant account usually necessitate enhanced transaction documentation. Keep thorough documentation of:

• Signed agreement or terms of service contract

• Delivery receipts

• Customer correspondence

• IP addresses and dates and times of transactions

• Conspicuous refund and cancellation procedures that customers proactively accept

4. Create Active Customer Support

Great customer support averts chargebacks by handling concerns before they become issues:

• Provide 24/7 assistance via various channels

• Clearly post contact information on your site and receipts

• Implement automatic transaction notification emails

• Design an easy refund process for unhappy customers

5. Use Chargeback Alerts and Prevention Services

Specialized services are offered by Trinity Consultings many high risk merchant account providers that:

• Notify you when a chargeback is filed, allowing you to issue a refund before it is processed

• Enable real-time monitoring of transaction patterns

• Automatically flag potentially troublesome transactions

• Provide dispute resolution support when chargebacks do happen

6. Use 3D Secure Authentication

This added security level makes cardholders go through an additional verification process with their issuing bank, which:

• Decreases unauthorized transactions

• Transfers liability from merchant to card issuer in most situations

• Leaves a documentation trail that makes your case stronger in disputes

Continuous Improvement Process

The best chargeback reduction approach is one of continuous analysis and fine-tuning:

• Group every chargeback by reason code

• Analyze patterns in timing, product categories, or customer segments

• Adjust policies or procedures according to these findings

• Monitor your chargeback ratio on a monthly basis to measure improvement

Conclusion

Though running a high risk business offers specific issues, your high risk merchant accounts tailored to specialty processing offers solutions uniquely suited to answer these questions. By applying these techniques and collaborating with your payment processor, you can decrease chargebacks substantially, safeguard your processing level, and establish a more viable business model. Keep in mind that in high-risk areas, chargeback control isn't merely about preventing fines—it's a key aspect of your business plan.