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High Risk Merchant Account Poll: Chargebacks vs. Holdbacks - What's Worst?

High Risk Merchant Account Poll: Chargebacks vs. Holdbacks - What's Worst? 


A previous article has been written about chargebacks, but this around, in lieu of shedding light to this high risk merchant account bad dream, let's make the boundaries clear. Besides the chargeback, there is another financial dilemma that high risk merchant's meet, the inevitable yet discreet, holdback.

Chargebacks are credit card transactions that the high risk merchant account provider charge to the merchant after a sale has been settled. This occurs after a customer disputes a transaction with the credit issuer and the customer's account has been given a refund. Customers give the most valid and and at the same time most outrageous reasons for disputing a transaction. But, fortunately, there are a number of effective ways to avoid chargebacks.

Holdbacks, on the other hand, is a percentage of the revenue coming from the high risk merchant's credit card transactions that is put on “hold” or on reserve by the acquiring bank to cover unforeseen disputes, charges or unwanted fees. It functions pre-determined coverage for future liabilities. The downside to this is you cannot fully enjoy the funds that are coming from the credit card transactions, the saving grace is that holdbacks will be returned into your high risk merchant account at a specified time either in full with no interest accumulated or the remaining amount after the chargebacks and other unwarranted fees have been deducted.

So, what's the verdict? My conclusion is that these two go hand in hand. If you have holdbacks, and no or less chargebacks occur, you can still earn more because when the holdback amount will be added back to your high risk merchant account. Practice the ways to elude chargebacks so that even if your high risk merchant account provider requires a holdback in your high risk merchant account, you'll get it back in full. Better yet, do businedd with a provider that will not put a holdback in your high risk merchant account, for nothing should hold you back from reaping the fruits of your labor.

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