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I used to recommend PayPal Website Payments Pro until they screwed me recently. I assumed the people that were abused by PayPal were few and far between until

by drm237 16y ago

I used to recommend PayPal Website Payments Pro until they screwed me recently. I assumed the people that were abused by PayPal were few and far between until it also happened to me. Now I tell everyone to get a real merchant account. It's just not worth gambling with your ability to process transactions.

originalgeek 16y ago
Do get back to us in about 6 months to let us know how your merchant account is performing in regard to chargebacks. In my experience, we never win with our merchant bank, yet almost always win with PayPal.
- jasonkester 16y ago
  What sort of business are you in that you're fighting with your customers over chargebacks? Couldn't you interpret this as something being horribly broken with the way you handle refunds? If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that.
  - dmethvin 16y ago
    It's all about where the customer enters the process. If they are using the software and say, "Hey I think this sucks" then they will likely go to your site and request a refund. If, however, they look at their credit card statement and think, "I didn't like that program, I meant to cancel it" or "Hey I don't remember buying anything from ABC Software" (because the name of your product is "Really Cool Thing Pro") then they are likely to find it easier to dispute the charge.
    - horseass 16y ago
      Reminds me of the seinfeld episode. Why do you want to return this? "Spite". Sorry, we don't allow refunds for spite. "Ok, I'll change my reason". No sorry, you already said spite.
    - jasonkester 16y ago
      That's one of the "broken process" things I had in mind when I wrote the above. The text that appears on your customers' credit card statement should clearly identify: - what they actually bought - how to contact you The quickest way is to have your domain name appear there, complete with .com so they know they can simply type it into a browser and get to the bottom of things. Of course, on that page you'll need to have a link they can use to figure out what they've bought from you and get a refund if necessary. There are a dozen little things you can do to reinforce the message that "we don't want your money unless you're amazingly happy". If your customer wants his money back, he'll get it one way or another. If you make it easy to simply reverse the transaction through you, they won't ever need to get their bank involved.
  - SwellJoe 16y ago
    "If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that." This is a fairy story. We have a no questions asked 60 day full refund policy. We have at least one chargeback a week due to stolen credit cards. We, of course, don't have any reason to fight them over it, so we just accept the chargeback when that happens. But, we definitely get chargebacks. I do occasionally get phone calls from people who don't know who we are. I answer their questions, and if the description doesn't ring a bell (sometimes they'll say, "Oh, I need to ask our system administrator if he bought that." and I never hear from them again), I process a refund immediately. But, software companies definitely get chargebacks. There's no way to completely avoid fraud without refusing lots of legitimate customers (AVS, for instance, doesn't work for most non-US card holders, and we do half of our business outside the US, so we can't reject orders with an AVS mismatch).
    - patio11 16y ago
      I've had 4000 sales now (crikey), and precisely one chargeback. You can make your own guesses about FC's volume over the interval at issue, but I find "no chargebacks in four years" entirely credible.
      - SwellJoe 16y ago
        This may be an aspect of the audience more than the product category (software). Your audience is teachers, correct? My audience is highly technical, and the particular segment is rife with piracy. Even though our product is 95+% Open Source (and so there is a free version that people can use to do nearly everything the commercial version does), we still have people who use stolen credit cards to order our products. And, it may also be a factor of product pricing. Your products are under $100, right? Ours run from $149-$999. Sounds like our sales volume is actually about the same as yours. Looking over the actual numbers, chargebacks are less than my initial estimate. More like once every 2-3 weeks, and sometimes we'll go a whole month or two between; but some months we'll see a rash of them. It averages out to a couple a month. But, it's definitely something we deal with regularly. Are you doing anything in particular to prevent fraudulent orders, or is it just the nature of your customer base that it simply doesn't use stolen credit cards to buy software? Also, how much of your business is international? We've found that 95% of our fraudulent orders are from overseas (but 50% of our legitimate orders are also from overseas, so we're not willing to make it difficult for those folks to buy from us).
  - dangrossman 16y ago
    You're either very lucky, haven't actually sold software/intangibles at volume before, or whatever you were selling had no value to the mass market. Other than those circumstances, you WILL be targeted by fraudsters, using stolen credit cards to purchase your wares. It's near impossible to detect them reliably up front, which is why most of PayPal's competitors went out of business a decade ago. The chargebacks are from fraud, not unhappy customers, and your refund policy is irrelevant to reducing them.
  - ylem 16y ago
    Or consider a service. Suppose you're ODesk or eLance--do you offer a money back guarantee months later after you've paid a contractor for their work?
  - originalgeek 16y ago
    We're not fighting with customers, we fight with banks, and it's not like it's a daily occurrence. And perhaps it's because we don't sell software. You might want to get that "contempt prior to investigation" thing you have checked out, as you have no idea what our return policy is, or what our customer base is like. Anyway, I am just sharing about the differing experiences we have had with PayPal and with our merchant bank.
    - jasonkester 16y ago
      I didn't mean any hostility in my post. Sorry if it came across that way. But regardless of who you're technically fighting with, it's still a matter of you trying to keep money from people who want it back. I can't come up with very many reasons you, as a business, would ever want to do that. All you'll accomplish is making those customers angry enough to tell the world how much they dislike your business, and they'll still get their money back through the chargeback. Seems like a losing proposition.
- drm237 16y ago
  That's an interesting point. I'll have to keep an eye on it and see if there's a difference, although our precent of chargebacks is so low, I'm not sure we'll have enough data in 6 months.
SwellJoe 16y ago
We switched from a merchant account to PayPal because of fraud and a dramatic increase in fees during the time we used the account. By the time we moved we were paying over 4%, plus flat fees! We were also dealing with several fraudulent orders a week, and the process for dealing with them required faxing documents back and forth, which is just idiotic. The fraud protection stuff at PayPal is better, though not great (too many false positives to call it great), and our rates are much lower. I do have a fear that someday they'll just decide to screw us and close our account, since it has happened to so many people. That'd be a bad day, for sure. But, in the meantime, I'm spending less money and have a dramatically better UI for managing things like chargebacks and refunds.
- pitdesi 16y ago
  SwellJoe - you were paying way too much for your merchant account... Unfortunately, that's sort of standard practice for credit card processors, even ones that we've seen people recommend on HN. We've got it in our contracts with http://FeeFighters.com http://FeeFighters.com processors that they can NEVER raise pricing, don't have any hidden fees, and we have reviews on them so you can see how other people have liked them. I don't know enough about fraud protection at PayPal, but we've heard a lot of horror stories when people come over to merchant accounts.
  - SwellJoe 16y ago
    "you were paying way too much for your merchant account..." Yeah, I know. That's why we switched to PayPal. The rates started out great (I think it was 2.1% when we started). Then they climbed every few months to being ridiculously expensive; they'd labeled our business "high risk", or something, somewhere along the way (despite the fact that all of the problems were because their fraud protection mechanisms were nonexistent). Doing anything about it required sending faxes back and forth with the provider, and waiting on the phone for half an hour to talk to a human, who would fax us forms, and then ignore them when we faxed them back. Anyway, at this point, I have a strict No Fax policy. If a company requires me to fax them something, or requires me to accept faxes from them, I won't do business with them, under any circumstance. The merchant services thing was the last straw on that front, and it seems the majority of merchant services companies still want to do business via fax (even BrainTree, last time I checked, who are reportedly a great company to work with...but if I have to fax them, even once, I'm not going to ever be their customer). Basically, discussing merchant services with me is like poking a hornets nest with a stick. I hate those people. I've dealt with a number of merchant services companies over the past dozen years I've run businesses, and I've hated every single one of them with a fiery passion. There may be good ones, but I've never met one I liked. I don't like how much PayPal charges, either, but they've yet to screw me over, so far. And, the rates are close enough to merchant providers that I wouldn't be willing to send a single fax to change it (and if history is any indicator, I'd have to send/receive dozens of faxes a year, if I switched back to a regular merchant account).

by drm237 16y ago

originalgeek 16y ago

Do get back to us in about 6 months to let us know how your merchant account is performing in regard to chargebacks. In my experience, we never win with our merchant bank, yet almost always win with PayPal.

jasonkester 16y ago
What sort of business are you in that you're fighting with your customers over chargebacks? Couldn't you interpret this as something being horribly broken with the way you handle refunds? If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that.
- dmethvin 16y ago
  It's all about where the customer enters the process. If they are using the software and say, "Hey I think this sucks" then they will likely go to your site and request a refund. If, however, they look at their credit card statement and think, "I didn't like that program, I meant to cancel it" or "Hey I don't remember buying anything from ABC Software" (because the name of your product is "Really Cool Thing Pro") then they are likely to find it easier to dispute the charge.
  - horseass 16y ago
    Reminds me of the seinfeld episode. Why do you want to return this? "Spite". Sorry, we don't allow refunds for spite. "Ok, I'll change my reason". No sorry, you already said spite.
  - jasonkester 16y ago
    That's one of the "broken process" things I had in mind when I wrote the above. The text that appears on your customers' credit card statement should clearly identify: - what they actually bought - how to contact you The quickest way is to have your domain name appear there, complete with .com so they know they can simply type it into a browser and get to the bottom of things. Of course, on that page you'll need to have a link they can use to figure out what they've bought from you and get a refund if necessary. There are a dozen little things you can do to reinforce the message that "we don't want your money unless you're amazingly happy". If your customer wants his money back, he'll get it one way or another. If you make it easy to simply reverse the transaction through you, they won't ever need to get their bank involved.
- SwellJoe 16y ago
  "If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that." This is a fairy story. We have a no questions asked 60 day full refund policy. We have at least one chargeback a week due to stolen credit cards. We, of course, don't have any reason to fight them over it, so we just accept the chargeback when that happens. But, we definitely get chargebacks. I do occasionally get phone calls from people who don't know who we are. I answer their questions, and if the description doesn't ring a bell (sometimes they'll say, "Oh, I need to ask our system administrator if he bought that." and I never hear from them again), I process a refund immediately. But, software companies definitely get chargebacks. There's no way to completely avoid fraud without refusing lots of legitimate customers (AVS, for instance, doesn't work for most non-US card holders, and we do half of our business outside the US, so we can't reject orders with an AVS mismatch).
  - patio11 16y ago
    I've had 4000 sales now (crikey), and precisely one chargeback. You can make your own guesses about FC's volume over the interval at issue, but I find "no chargebacks in four years" entirely credible.
    - SwellJoe 16y ago
      This may be an aspect of the audience more than the product category (software). Your audience is teachers, correct? My audience is highly technical, and the particular segment is rife with piracy. Even though our product is 95+% Open Source (and so there is a free version that people can use to do nearly everything the commercial version does), we still have people who use stolen credit cards to order our products. And, it may also be a factor of product pricing. Your products are under $100, right? Ours run from $149-$999. Sounds like our sales volume is actually about the same as yours. Looking over the actual numbers, chargebacks are less than my initial estimate. More like once every 2-3 weeks, and sometimes we'll go a whole month or two between; but some months we'll see a rash of them. It averages out to a couple a month. But, it's definitely something we deal with regularly. Are you doing anything in particular to prevent fraudulent orders, or is it just the nature of your customer base that it simply doesn't use stolen credit cards to buy software? Also, how much of your business is international? We've found that 95% of our fraudulent orders are from overseas (but 50% of our legitimate orders are also from overseas, so we're not willing to make it difficult for those folks to buy from us).
- dangrossman 16y ago
  You're either very lucky, haven't actually sold software/intangibles at volume before, or whatever you were selling had no value to the mass market. Other than those circumstances, you WILL be targeted by fraudsters, using stolen credit cards to purchase your wares. It's near impossible to detect them reliably up front, which is why most of PayPal's competitors went out of business a decade ago. The chargebacks are from fraud, not unhappy customers, and your refund policy is irrelevant to reducing them.
- ylem 16y ago
  Or consider a service. Suppose you're ODesk or eLance--do you offer a money back guarantee months later after you've paid a contractor for their work?
- originalgeek 16y ago
  We're not fighting with customers, we fight with banks, and it's not like it's a daily occurrence. And perhaps it's because we don't sell software. You might want to get that "contempt prior to investigation" thing you have checked out, as you have no idea what our return policy is, or what our customer base is like. Anyway, I am just sharing about the differing experiences we have had with PayPal and with our merchant bank.
  - jasonkester 16y ago
    I didn't mean any hostility in my post. Sorry if it came across that way. But regardless of who you're technically fighting with, it's still a matter of you trying to keep money from people who want it back. I can't come up with very many reasons you, as a business, would ever want to do that. All you'll accomplish is making those customers angry enough to tell the world how much they dislike your business, and they'll still get their money back through the chargeback. Seems like a losing proposition.
drm237 16y ago
That's an interesting point. I'll have to keep an eye on it and see if there's a difference, although our precent of chargebacks is so low, I'm not sure we'll have enough data in 6 months.

SwellJoe 16y ago

We switched from a merchant account to PayPal because of fraud and a dramatic increase in fees during the time we used the account. By the time we moved we were paying over 4%, plus flat fees! We were also dealing with several fraudulent orders a week, and the process for dealing with them required faxing documents back and forth, which is just idiotic. The fraud protection stuff at PayPal is better, though not great (too many false positives to call it great), and our rates are much lower. I do have a fear that someday they'll just decide to screw us and close our account, since it has happened to so many people. That'd be a bad day, for sure. But, in the meantime, I'm spending less money and have a dramatically better UI for managing things like chargebacks and refunds.

pitdesi 16y ago
SwellJoe - you were paying way too much for your merchant account... Unfortunately, that's sort of standard practice for credit card processors, even ones that we've seen people recommend on HN. We've got it in our contracts with http://FeeFighters.com http://FeeFighters.com processors that they can NEVER raise pricing, don't have any hidden fees, and we have reviews on them so you can see how other people have liked them. I don't know enough about fraud protection at PayPal, but we've heard a lot of horror stories when people come over to merchant accounts.
- SwellJoe 16y ago
  "you were paying way too much for your merchant account..." Yeah, I know. That's why we switched to PayPal. The rates started out great (I think it was 2.1% when we started). Then they climbed every few months to being ridiculously expensive; they'd labeled our business "high risk", or something, somewhere along the way (despite the fact that all of the problems were because their fraud protection mechanisms were nonexistent). Doing anything about it required sending faxes back and forth with the provider, and waiting on the phone for half an hour to talk to a human, who would fax us forms, and then ignore them when we faxed them back. Anyway, at this point, I have a strict No Fax policy. If a company requires me to fax them something, or requires me to accept faxes from them, I won't do business with them, under any circumstance. The merchant services thing was the last straw on that front, and it seems the majority of merchant services companies still want to do business via fax (even BrainTree, last time I checked, who are reportedly a great company to work with...but if I have to fax them, even once, I'm not going to ever be their customer). Basically, discussing merchant services with me is like poking a hornets nest with a stick. I hate those people. I've dealt with a number of merchant services companies over the past dozen years I've run businesses, and I've hated every single one of them with a fiery passion. There may be good ones, but I've never met one I liked. I don't like how much PayPal charges, either, but they've yet to screw me over, so far. And, the rates are close enough to merchant providers that I wouldn't be willing to send a single fax to change it (and if history is any indicator, I'd have to send/receive dozens of faxes a year, if I switched back to a regular merchant account).