When a business claims to have a free-trial option such as a sample of the product or services for a period of time but they ask for the customer’s credit card information in advance and charge it the minute the free trial ends that is what’s called negative option billing. Nutraceutical merchants are known for this type of practice considered to be a type of fraud.
This is because customers don’t really have the chance to stop being charged unless they are proactive about canceling further shipments of the product or service in time. Hence why nutraceutical merchant accounts are so high risk. Even though in some industries opening a merchant account can be difficult, it is necessary.
In this day and age we’re living a society where cash is uses less and less. Business owners of every kind have learned that to be able to stay afloat they need the ability to take credit cards. Nevertheless, online businesses have had to endure heightened scrutiny and demands from the providers of card possessing the past few years. Some account providers have the power to put merchants out a business all too quick by taking away their ability to process payments.
Since the boom of e-commerce, businesses based online and the ability to pay online have caused an outbreak of trouble for consumers including scams, fraud, misrepresentation, get rich quick schemes and even blatant stealing from customers. Now we’re at a point where these kinds of issues, being so widespread and detrimental to consumers, have brought about a ubiquitous awareness of chargebacks. That is, at least when it come to merchants and their account providers.
In fact, a number of years ago The Dot Com Disclosures — published guidelines for acceptable online merchant conduct — circulated in the world of e-commerce. Although it took some time for these recommendations to be taken seriously, now Visa and Mastercard are taking matters into their own hands. If they find out that merchants are taking part in certain brand damaging practices such as negative option enrollment or continuity programs, they will severely fine those businesses. Furthermore, in some circumstances Mastercard will demand that the merchant’s ability to process payments to stop as once.
Some of Visa’s policies now include that the processors decline applications for merchants who operate their business using negative enrollment as well as free trial, deferred billing and shipping only promotions that are misleading. Also, hidden or delayed charges for items or services said to be free will be counted as unacceptable practices along with cross selling or up selling. What it really comes down to is being forward and honest with customers rather than using deceptive ploys to get their money.
Of course, this is pretty much a given to many e-commerce merchants, who may even have a high risk nutraceutical merchant account, but have no desire to run a disreputable business. However, for those merchants who do engage in the brand damaging practices mentioned, there is a possibility they will loose their ability to process credit cards because of it.
Do you have an online business? What is your view regarding these brand damaging practices? If you are interested in having an account processor that’s up to date on card processing guidelines, Ultimate Merchant Providers is a good place to start.