Billing Limits & Chargeback Thresholds: How Strict Are Processors?

[frodo92]

Hi everyone,

I'm looking for detailed info about how payment processors handle chargebacks when they appear early in the transaction history (e.g., within the first few weeks). Specifically:

1. At what point do processors start taking action if chargebacks are high in the first few weeks of processing?
2. Do they immediately ban your account, or do they wait to see if your chargeback rate improves over time?
3. During this period, do they hold your funds, or are you still able to withdraw while they monitor?

I'd appreciate hearing about any experiences or insights.
Thanks!

 

[polonieth]

frodo92 said:
Hi everyone,

I'm looking for detailed info about how payment processors handle chargebacks when they appear early in the transaction history (e.g., within the first few weeks). Specifically:

1. At what point do processors start taking action if chargebacks are high in the first few weeks of processing?
2. Do they immediately ban your account, or do they wait to see if your chargeback rate improves over time?
3. During this period, do they hold your funds, or are you still able to withdraw while they monitor?

I'd appreciate hearing about any experiences or insights.
Thanks!
Click to expand...

1. As soon as you hit a certain threshold. With most processors you won't make it to anywhere near 1% disputes before issues arise. Visa / MC have their own internal thresholds which if you hit them, the processor is hit with a fine. I imagine Stripe is even stricter now, so perhaps 0.5% is enough of a flag.

2. It's going to depend on how legit the business is. Why would it improve over time?

3, Hold. Or hold a % of it.

 

[Dandyline]

polonieth said:
1. As soon as you hit a certain threshold. With most processors you won't make it to anywhere near 1% disputes before issues arise. Visa / MC have their own internal thresholds which if you hit them, the processor is hit with a fine. I imagine Stripe is even stricter now, so perhaps 0.5% is enough of a flag.

2. It's going to depend on how legit the business is. Why would it improve over time?

3, Hold. Or hold a % of it.
Click to expand...

Stripe is fine with 1% for many businesses, it all depends on many factors. With a Merchant account, you can go even higher.

 

[polonieth]

Dandyline said:
Stripe is fine with 1% for many businesses, it all depends on many factors. With a Merchant account, you can go even higher.
Click to expand...

Do you think Stripe is okay with a 1% dispute rate? You will be on all monitoring programs at that level.

What factors does it depend on?

 

[Dandyline]

polonieth said:
Do you think Stripe is okay with a 1% dispute rate? You will be on all monitoring programs at that level.

What factors does it depend on?
Click to expand...

No, you will not. I know multiple businesses with 1% using Stripe. Its not only about the percentage, it depends on the disputed amounts, age of the account and other things.

It's also very easy to maintain a low chargeback percentage.

 

[frodo92]

I'm more interested in how long a card processing account lasts.

Let's say in the first week I have 100 transactions and 5 customers make chargebacks. That's basically 5% chargebacks.

Will the payment processor ban my account from now on, or will they allow me to continue processing payments?

When will it ban my account? Will they let me process for a few consecutive months with the idea that maybe the chargeback percentage will decrease or will they ban me and that's game over?


The idea is that I have a project that involves chargebacks of 3-5% and I'm thinking about the idea of creating multiple accounts with the same processor or different processors and run on each account for a few weeks / months until they ban me. This is because I can't find a processor that will allow chargebacks in such a high percentage.

 

[Dandyline]

frodo92 said:
I'm more interested in how long a card processing account lasts.

Let's say in the first week I have 100 transactions and 5 customers make chargebacks. That's basically 5% chargebacks.

Will the payment processor ban my account from now on, or will they allow me to continue processing payments?

When will it ban my account? Will they let me process for a few consecutive months with the idea that maybe the chargeback percentage will decrease or will they ban me and that's game over?


The idea is that I have a project that involves chargebacks of 3-5% and I'm thinking about the idea of creating multiple accounts with the same processor or different processors and run on each account for a few weeks / months until they ban me. This is because I can't find a processor that will allow chargebacks in such a high percentage.
Click to expand...

Disputes are counted on a 1-2 month basis.

 

[polonieth]

frodo92 said:
I'm more interested in how long a card processing account lasts.

Let's say in the first week I have 100 transactions and 5 customers make chargebacks. That's basically 5% chargebacks.

Will the payment processor ban my account from now on, or will they allow me to continue processing payments?

When will it ban my account? Will they let me process for a few consecutive months with the idea that maybe the chargeback percentage will decrease or will they ban me and that's game over?


The idea is that I have a project that involves chargebacks of 3-5% and I'm thinking about the idea of creating multiple accounts with the same processor or different processors and run on each account for a few weeks / months until they ban me. This is because I can't find a processor that will allow chargebacks in such a high percentage.
Click to expand...

5% chargebacks in the first week is not going to work. Not with a mainstream processor. I have no idea what these replica sites etc use where it obviously must be higher.

The idea that it's counted on a 1-2 month basis isn't going to work either. Do you think these processors are dumb? "Oh well, it's only been a week; let's give him until the end of the month!"

I also don't believe Stripe tolerates a 1% dispute rate, at least not until I see it. And I've seen the opposite, which is true: you are on Visa's watchlist at that level, and they get hit with fines.

Why would a processor assume it will get better?