How Some Credit Card Processing Companies Seem to Be Strangling Ecommerce (Why We Love Amex & Discover)

By Anne Holland, President

It's my blog, so I can rant if I want to.

This morning when I walked in to say "Hi" to our wonderful head of customer Service, Sharon Hamner, she was about to cry tears of rage and frustration. Turns out Nova, the credit card order processing company we use, is suddenly and without warning declining all Visa and MC orders from SherpaStore. Yup, for the next 48 hours (until the dot of March 1st), all Visa and MC cardholders will be declined at our store no matter how good your card is. (However, if you use Amex or Discover, or want to be billed, you're still ok.)

Why are Mastercard and Visa stopping us cold in our tracks via Nova? Because we're too successful.

Visa and MC don't like merchants who do well because then the card companies' risk gets higher. You see, legally in the US, consumers have 90 days to complain about a fraudulent charge and get it reversed.

This consumer safety net is the number one reason why ecommerce has been phenomenally successful in the US. I've talked with plenty of marketers in other countries that don't have such consumer protections, and they say it's far tougher to get online orders.

However, the safety net scares the heck out of the card companies. Why? Well, what if a merchant suddenly goes bankrupt or flees the country with all of their past 90 days' revenues and leaves the card company holding the bag? What if the card company has to refund heaps of upset customers?

To limit this risk, the card processors give each merchant a revenue limit. That's right, you can only make so much per month. While it makes sense in theory, the problem with reality is that:

#1. Most card processing companies don't warn most merchants about this revenue ceiling. So you have no idea it exists until you hit it or hear about it from a colleague.

Luckily, I was warned three years ago by the ecommerce VP behind a household brand name's site that had been shut down one weekend by card processors for "making too much."

#2. Most card processing companies don't alert you when your ceiling is imminent, nor do they tell you at the moment they cut off your processing capabilities. Suddenly all your orders are rejected, and that's it.

#3. Most card processing companies are slow and bureaucratic. No service rep or supervisor has the ability to help you on the spot. All decisions must be kicked to an executive in another department who may get back to you in 48 hours. Or not.

The fact that your site is rejecting orders NOW doesn't concern them.

#4. Most card processing companies are exceptionally unfriendly to merchants that are smaller than, say, megalithic. In exchange for a 2%-3% cut of your revenues, they'll refuse to give you a personal service rep or to allow reps to tell you their last names or direct phone extensions or let you speak directly with anyone who has any power.

As I said above, we're not the only site to have run into problems like this. In fact, the list is as long as my arm and lots of famous names are on it. We're actually luckier than most because being forewarned, we've been pro-actively negotiating our limit on an ongoing basis for years now.

Plus, we're not new nor suddenly skyrocketing (two things processing companies fear and despise). Our business has shown steady trends for six years now, and customers like us so we don't get many chargebacks.

Despite all of this, our store was cut off with zero warning late Friday night. We were penalized for being successful. In America. Thank you.

Well, all I can say is thank goodness for American Express and Discover. These two companies sidestep the archaic regs that hem in Visa and MC and are more than happy to take our business. Even when we do really well.

For the next 48 hours if you want to order from us, you'll have to use Amex, Discover or contact Sharon's department for an invoice at (877) 895-1717. And you know what? That's just fine with me. I'm fed up with the other two card brands right now.