chargebacks and reserves

Printable View

10-07-2005, 12:27 PM
Chilihost

chargebacks and reserves

When a chargeback processes against your account, the billing companies take the funds out of the current period's income. Shouldn't this be coming out of their reserves? Isn't the whole idea of reserves to have money there in case of refunds or chargebacks?

It makes no sense to me!!!

cheers,
Luke
10-07-2005, 12:33 PM
tombarr

Luke

My understanding of CC processing reserves is that it functions as a float of revenue tied to the processing amount as a calculated risk protection against the site or account owner shutting down and skipping town....and then customer charging back up to a year later. The reserve is not meant to handle real time chargeback withdrawls...that comes out of the forward revenue processing.
10-07-2005, 05:55 PM
sperbonzo

Quote:

Originally Posted by tombarr

Luke

My understanding of CC processing reserves is that it functions as a float of revenue tied to the processing amount as a calculated risk protection against the site or account owner shutting down and skipping town....and then customer charging back up to a year later. The reserve is not meant to handle real time chargeback withdrawls...that comes out of the forward revenue processing.

That is pretty much correct. The reserve, (which is held by the bank, not the processor), is used by the bank as a reserve against a catastrophic situation involving extreme merchant fraud, or major VISA/MC fines resulting from excessive chargebacks, (those fines can quickly reach the $50k per incident mark after a certain threshold is reached). Real-time chargebacks are dedudted from current revenues.
10-07-2005, 06:14 PM
basschick

some webmasters have shut down their entire program and all their sites without cancelling members. or often sites stop updating, and members get annoyed - guys who wait for updates might cancel for 2 months, not just one. in those cases, a huge number of chargebacks can show up - sometimes months later. that's what the reserve is there to cover.

remember - chargebacks can happen months after a member has cancelled.
10-07-2005, 07:19 PM
Chilihost

oh ok that makes sense...can you tell I don't get a lot of chargebacks and got one today :)

cheers,
Luke
10-08-2005, 12:36 AM
basschick

hey, that's great :)

Quote:

Originally Posted by Chilihost

oh ok that makes sense...can you tell I don't get a lot of chargebacks and got one today :)

cheers,
Luke
10-10-2005, 01:17 AM
Lee

You know, i was always under the impression that the reserves were used for chargebacks to.

Guess you really do learn something new everyday in this business :)

Regards,

Lee
10-10-2005, 02:59 AM
JoshTucker

Quote:

Originally Posted by Lee

You know, i was always under the impression that the reserves were used for chargebacks to.

Guess you really do learn something new everyday in this business :)

Regards,

Lee

yea totally...very informative.

"And knowing is half the battle" ~ G.I. Joe
10-10-2005, 10:31 AM
_ap_

awww thats so cute luke got his first chargeback :D