Strategies for Managing Credit Card Payments
All charged amounts are deposited into the sponsoring bank's account by the card issuer's bank, and that amount, minus an "interchange" fee (the base rate for processing bank card transactions that is set by the bank card associations), the processor's fee and the gateway fee, is deposited into the merchant's bank a few day's later.
Refunds, Credits and Chargebacks
Into every life some rain must fall. For the merchant, this comes in the form of customer returns, refunds, credits and "chargebacks." Your order management system should automatically generate requests for refunds and credits, which are sent to your service bureau for processing. It's the chargebacks that are a bit trickier.
A chargeback is initiated by the consumer through the card-issuing bank when she receives her credit card statement, and she hasn't received an expected credit or refund, or simply doesn't recognize or remember the charge (it could be a fraudulent charge). The issuing bank will ask you for proof that the original charge was valid and should remain so. It is then the merchant's responsibility to provide order records or copies of communications with the customer.
The banking community hates chargebacks even more than merchants do: If chargebacks exceed more than 1 percent of your monthly transaction volume (or 2.5 percent of dollars charged), you not only will be slapped with penalties ranging up to $100,000 but will end up losing your merchant account privileges! (VISA charges a $5,000 "review fee" for the first five months of over-limit chargebacks, then imposes fines thereafter. MasterCard starts charging $25,000 penalties at month four.)
Avoiding chargebacks is one reason most merchants don't charge the customer's card until after the order has shipped.
There are numerous details of which to beware. Some, briefly:
> Method of order: The bank card interchange protocols now require that any records you transmit for authorization and charges contain a code or "flag" indicating the order originated on the Internet.