
Originally Posted by
Zofia
First of all, strip clubs have a tough time getting a merchant account. When they do, there's a big fee. A strip club is a lot better off getting an ATM and charging an outrageous processing fee.
Second, if a customer disputes a CC charge, the credit card company has to initiate an investigation. There are a set number of reasons that the customer can dispute a charge and they are set out in the issuing agreement. Provided the customer says it's one of the reasons, then the CC company cannot charge interest or penalties on the disputed amount while they investigate, and the customer does not have to pay the disputed amount.
If the CC company determines that the customer is right, then the amount is taken off his bill and charged back to the merchant. There is a very big very black mark on the merchant from that day forward. If the CC company finds actual fraud, they can cancel the merchant's account. If it's just a quality dispute or something like that, the CC company will most likely not cancel the merchant, but they will be watched closely.
All new merchant accounts are subject to a lot of fraudulent attacks from customers. The CC companies know this and charge accordingly. And a certain amount of slack is given to new merchant accounts regarding this. Online merchants are particularly easy to attack by a criminal customer. They will charge something, take delivery and then tell the CC company that the product never arrived, or was compeletely defective. If the merchant doesn't do proof of delivery, guess what, the criminal wins, he gets away with ripping the merchant off and he gets the product too. Of course, the CC companies track their customers charge back history. But, with the frequency of new credit card applications a criminal ring can work for a long time.
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