The Offshore Merchant Account Scam:

How the porn and gambling mega-operations are making a killing stealing fortunes from unsuspecting merchants.  Learn how so you don't fall for it.

Beware of the conscienceless companies who tell you that everything will be fine, including high chargebacks and a high fraud rate.  They also often offer onshore equivalent processing fees.  Why would an offshore company do that?  It costs more money to operate offshore?  There are a lot of scammers in this field. They are actually not a scam but they are hoping that you fail.  There game is to let you process for several months until you have built up a large sum of money in chargeback holdback fund.  Next you will find they will have an excuse why your payment is delayed so that you keep on processing 2 or 3 months worth of money without being paid.  You may think that you won't fall for it but remember that many have been down the path before you.  They are very good and the excuse seems very legitimate.  Then they will cite high chargebacks and shut your account.  If you were billing $30,000 per month and they have a $10,000 in their rolling 10% holdback fund and they haven't paid you for 3 months, they are sitting on $100,000 of your money.  The contract will state that they will return your money after 6 months but just try!  They are offshore themselves.  Litigating is far too expensive and they know that.  Basically your money is lost!  Be very careful.  You have to know which providers are scammers and which are not.  This is where your money for an introduction is well spent.  As a law firm we are looking for an ongoing relationship with our customers and we have a reputation to uphold.

Now you might ask yourself how the really high-risk industries like porn with chargeback rates over 30% survive. The answer is quite simple.  They have become merchant account companies themselves.  They sell merchant accounts (usually of the offshore variety) to businesses.  If the merchant has a chargeback rate of under 1% they value and keep them.  If a merchant has high chargeback rates they wait a few months and then close the account and keep the money!  They use the low chargeback accounts to dilute their own chargeback rates and bring them under 1%.  Either way they win.  This is a very dangerous business.  We highly recommend you think of an introduction fee as a cheap insurance policy.

Read more about offshore mechant accounts.