So why is it that you should not be afraid to use your credit card online? There are a couple of reasons. Let me explain.
The first reason is that if you are in the United States, there is a law that protects you from online credit card fraud by limiting your losses to $50. Sure, losing $50 would not be a good thing, but it is a heck of a lot better than losing $100 or $1000 or whatever amount some crook decided to charge on your account.
The second reason, as I have recently learned, is that it is the merchant that is taking all the risk by offering customers the ability to pay online by credit card.
As I have mentioned before, I have a hobby-related site where I sell a few items online. It is not a huge business and does not make tons of money but it adds nicely to my income on a pretty regular basis.
Like most other online businesses, I wanted to be able to offer my customers the ability to pay right on my web site with a credit card. Isn’t that the way everyone wants to shop online these days? I know I do!
For the first year or so that my site was online, I used PayPal to process all the credit card orders for my customers. It seemed to work well but the only problem I had with the process was that my customers would be taken to the PayPal website during the checkout process before they could complete their order. It all seemed to work fine, but I felt like I was making the checkout process more difficult than it needed to be and everything I ever read about running an e-commerce website said that it needs to be as easy as possible for customers to complete their order.
Sometime last year, PayPal came out with a new service that would allow you to process customer orders right on your website without forcing customers to the PayPal site. What a great idea that was! It was just what I was waiting for.
The only problem was that the software I was using on my website could only make use of the new PayPal system if I applied a boatload of programming code to my website by hand and even then I could not be sure it would work.
Since I was not able to use the new PayPal system at the time, I decided to look into the possibility of signing up for a more traditional merchant account that would allow me to accept credit card payments on my site.
I found some modifications I could use on my website that I could easily install to allow my customers to use their credit cards through the more traditional type of merchant account, so I decided to sign up for one.
I should also mention that I had run into a chargeback problem with PayPal a short time before this and I was waiting for a final decision from PayPal with regard to how it would be handled.
Before I go on, let me explain for those who may not know what a chargeback is.
A chargeback can occur for a few different reasons, but the one I want to talk about today is as a result of a fraudulent transaction.
This is exactly what happened with the PayPal chargeback. Although the merchant companies are not willing to share all the details of these incidents, as far as I could tell, someone used a stolen credit number to make a purchase on my website.
As you might expect, the poor person whose card number was stolen gets a surprise when they receive their next credit card statement and finds a bunch of purchases on it that they did not make.
As far as I can tell, the first thing the merchant account company does during these situations is extract that money from the merchant. In this case, PayPal deducted the amount of the fraudulent transaction from my account.
In essence, the merchant, in this case, me, takes the loss. 100% of it. At least that is how the processes begins.
It was the first chargeback I had to deal with and up until that time I didn’t know a lot about how these things get worked out.
I was asked to provide as much information regarding the fraudulent transaction that I could come up with and pass it along to PayPal, which I did. They informed me that it could take a while before a final decision was made and there was a possibility that PayPal might even return the amount of the fraudulent transaction to our account.
I had heard a number of negative stories regarding PayPal’s merchant services over the years, but to be fair, I had never had any real problems with them. This fraudulent transaction was the first real problem, and at the time, I was not too happy about it. After all, who likes being ripped off?
The software I used on my website allowed for the simple addition of a payment processing module for a merchant account company known as “Secure Pay,” so that was the company I called to sign up for a merchant account and begin the process of making it easier for my customers to make a purchase on my website.
The fellow I talked to at “Secure Pay” said his name was Randy, and like most people who are trying to sell you something, he seemed very friendly.
During our conversation with Randy, I happened to mention my recent problem with a chargeback and how I was not sure how PayPal would end up handling it.
At this point, my new friend Randy assured me that his company (“Secure Pay”) stands behind their merchants and suggested that I would not have to worry about chargebacks. That was what I wanted to hear, and being a good salesman, Randy knew it.
After talking with Randy, I talked with the other people I needed to talk to in order to get my account set up and before long I had the proper software module installed on my website that would allow my customers to check out right on my website using their credit card. I wondered if business might even improve a bit since the new checkout process would be a lot faster and easier. Still, I decided to leave PayPal there as an option as well.
The new payment process seemed to be working fine. Business did not get any better as a result, but I was happy to know that the checkout process was faster and easier for my customers.
After a few months, I received a thick packet in the mail from my new merchant account company, who, by the way, seems to go by different names depending on what they are sending out.
For a while the statements I received from them were from a company calling itself “Merchant Services” which has since been changed to “Pipeline Data Processing.” With the addition of “Secure Pay,” that makes three names being used by this company, or perhaps it is really three separate companies that obviously have some connection to one another. Who knows.
Getting back to the thick packet I received, this one had some bad news for me. It was to inform me about my first chargeback. This one was about twice the amount of the one that came in through PayPal. Not a fortune by any stretch of the imagination, but again, who likes getting ripped off?
Again I was asked to provide as much information as I could regarding the transaction and once again I spent time looking up internet addresses and service providers and every other scrap of info I was able to find so I could send it back to “Secure Pay,” or whatever they call themselves.
A while later I got another letter in the mail from them to let me know that they had decided to go ahead and keep my money. I guess the information I sent them didn’t really do me much good at all. Although they did tell me I could dispute the chargeback.
Not being sure how it was I could dispute the chargeback other than hiring “Dog The Bounty Hunter” to track the crook down for them, I simply wrote them a letter with my side of the story. I made sure they understood exactly how I felt about the situation and how disappointed I was with their service. Especially after being told by Randy that they would stand behind me.
In retrospect, I wonder what that really meant. Because it sure didn’t mean that they were going to take the hit when a fraudulent transaction reared its ugly head. They wouldn’t even absorb part of the cost, which I thought would be kind of nice since it was their system, after all, that so willingly approved the transaction. Not to mention the credit card company (CitiBank) whose card was used to commit fraud.
But we all know how willing big multi-million (billion, perhaps?) companies are to part with their money.
In response to my letter, I got another letter from them advising me that my efforts in disputing the chargeback didn’t measure up and they would not be refunding the amount of the fraudulent transaction. Big surprise.
At this point I began to reconsider my decision to sign on with this particular merchant account company. And the more I thought about it, the less confidence I had in the security of their system.
The fraudulent transaction in this case was the result of a stolen credit card number since the paperwork I received regarding the chargeback contained a copy of an affidavit from the rightful owner of the credit card stating that the card was in his possession the entire time.
The transaction in question was as a result of a purchase that was made on my website using a name and address that was completely different from that of the rightful card owner. This is what they call “security?”
From what I could tell, the only valid information that was required to make a purchase through “Secure Pay” was a credit card number and the associated expiration date. The name and address, if my experience was any indication, did not matter at all and may as well have been “Mickey Mouse, Main Street, Disney World.” Apparently, it would have been processed by “Secure Pay” without any problem at all as long as the credit card number and expiration date were valid.
It was then that I remembered processing a credit card order over the phone a few weeks prior.
Most, if not all, merchant accounts provide a web site that merchants can log into to process a credit card order for a customer who would rather place their order over the phone.
During this particular transaction, I incorrectly typed in the name of the city where the customer lived and only noticed it after the order has been approved by the system. She actually lived in Sandusky, Ohio and I mistakenly typed in “Dandusky” which the system did not complain about at all. Pretty impressive security, don’t you think?
Which brings me back to PayPal. In contrast to my experience with “Secure Pay,” I had always found the PayPal system quite picky when it came to entering the correct data when placing an order. If a name was misspelled or a Zip Code was wrong, the system would not accept the order. At time time I thought it was a bit annoying, but as you might suspect, I now see that it was a good thing and could help reduce the number of fraudulent transactions.
Although I was far from being happy about the most recent chargeback, I had more-or-less resigned myself to the fact that it was a cost of doing business and was something I would just have to live with.
Until I got my statement in the mail a couple of days ago.
The merchant account company, who had decided to start calling itself “Pipeline Data Processing” for the first time I can recall, had revamped the format of their statement and it was now a lot easier to read and had a lot more information that the statements I had received previously which were printed on a single sheet of paper with very small print and very little detail regarding their fees and charges.
What an eye-opener this statement was! It became clear to me at this point that I was paying a LOT more for their services than I ever had to pay PayPal. And PayPal provided a better service if you ask me!
But that was not the best part! The best part was the line item I found in the transaction detail section where it showed the recent chargeback. To my surprise, this line item also included a mysterious $20.75 deduction under the “Fees” column. I wish I could have seen myself in the mirror when I first noticed it because my eyes probably almost popped out of my head!
Could it possibly be? Could they have charged ME $20.75 because some crook came to my website and ripped ME off? I was convinced that there had to be some other explanation so I called them on the phone to find out.
Sure enough, the nice lady on the phone confirmed for me that I was indeed being charged $20.75 due to the chargeback! Wow, is that service or is that service? In addition to losing the amount from the fraudulent transaction, I lose another $20 because I had to nerve to be victimized!
I get ripped off by someone using a stolen CitiBank credit card number that is processed through “Secure Pay” with no problem and I am the one that gets hit with an additional fee because of it?
Wow, I guess this is what it feels like to be victimized. Twice! Once by the crook who stole something from me and then again by a company whose salesman told me that they would stand behind me.
Gee whiz, if that is a good example of standing behind someone, I sure don’t want to know what it would be like if they weren’t standing behind me!
I told the nice lady on the phone that I would not be doing business with that company much longer and thanked her for her help. It was, after all, not her fault — she’s just trying to earn a living trying to explain away greed-inspired policies made by people making a lot more money than she is.
I am now in the process of upgrading the software on my website so that I will be able to use the new PayPal system to process credit cards right on my website. I will then cancel my account with “Secure Pay” and make a note to never do business with that company again. No matter which one of their three names they are using that day!
The real point of all my rambling here is to let you know who really takes the risk when it comes to using credit cards online.
Yes, someone surely pays the price for the millions of fraudulent transactions that must be processed online every year, but it is not the consumer.
That should make you feel a little more safe next time you worry about using your credit card to make a purchase online.
By the way, remember my PayPal chargeback? Well, it took them a month or two, but they eventually decided to credit the money back to my account, so I didn’t end up losing anything.
That leaves the current score as follows:
PayPal: 1
“Secure Pay:” 0
Bye, bye “Secure Pay.” You will not be missed.
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