chargebacks and reserves

[Chilihost]

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

[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.

[sperbonzo]

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.

[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.

[Chilihost]

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

cheers,
Luke

[basschick]

hey, that's great

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

cheers,
Luke

[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

[JoshTucker]

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

[_ap_]

awww thats so cute luke got his first chargeback