Give me back my money... with interest

3 points by gordian 12 years ago | 4 comments

My business takes orders over the phone, internet, and even SMS. Most customer pay via credit card.

The number of customers who dispute charges with their credit card companies is very low. My response rate is 100% and I have never lost a dispute.

Nevertheless, the first thing that happens when a customer initiates a dispute is that the disputed funds are debited from my merchant/bank account. I am also charged a flat fee.

I always contact the customer the same day I receive notice of the dispute and I send my reply to their bank immediately after that.

The dispute process is ridiculously long considering we're in 2014 and it usually takes around six weeks. I've even had customers admit they erroneously disputed the charge and they call their bank with me on the phone to drop the dispute. It still takes six weeks for my merchant to show the dispute as resolved in my favor!

That means it takes six weeks to get my money back. Thankfully my merchant also refunds the dispute fee if it's resolved in my favor, but that's six weeks where I've been unable to use those funds (including the dispute fee) and I no longer have the merchandise that I shipped.

So after six weeks, when the dispute is resolved in my favor: GIVE ME BACK MY MONEY WITH INTEREST!

Credit card companies charge their customers interest if the dispute is resolved against them. Why don't I receive interest on my money?

Throughout those six weeks my money goes somewhere. I don't know if my merchant holds onto it or if the merchant actually sends it back to the credit card issuer; even if it gets put into a lousy bank account then it would earn some interest.

The bottom line is that the funds are disputed, not stolen and the time value of money applies to merchants the same way credit card companies apply it to their cardholders.

anigbrowl 12 years ago |

It's a cost of doing business. You're not going to get it itemized for you so the logical thing to do is build it into your pricing.

tehwebguy 12 years ago |

The chargeback is one of the most attractive features credit cards offer customers. It's one of many features that CC companies have used for decades to make sure that nearly everyone has one or more debit or credit cards.

Dealing with chargebacks is one of the costs that comes with being able to accept a payment instantly from billions of people.

There are ways to mitigate it though:

1. Make sure you include a phone number on your CC statement line so they can easily call to verify the charge

2. Get a short, obvious domain, like X-charge.com where X is your domain and list that so that people reading their statement can instantly see what it is

NameNickHN 12 years ago |

> Credit card companies charge their customers interest > if the dispute is resolved against them.

They do that because they can and the don't pay you interest also because they can and you have no leverage against them. Sad but true.

jesusmichael 12 years ago |

Yea... that really sucks. However, its not a practice that's likely to change soon. Large clearing houses even have a line item on their P&L's for the float.