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

Beware of the conscienceless offshore merchant account 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 merchant account company do that?  Reputable offshore merchant account providers charge around 4-6%. 

The Scam 

There are a lot of scammers in this field. What they are doing is not exactly a scam but they are counting on the fact that you will have a few chargebacks so they can shut you down and keep your money.  Their game is to let you process for several months until you have built up a large sum of money in chargeback holdback fund (usually a 6 month rolling reserve of 10%).  It usually starts with 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.  They will cite high chargebacks or a high refund rate and stop payments to your bank account.  When you call they will tell you about a technical problem.  The second time you call they will tell you that you will be paid after they investigate one or more of your chargebacks.  The idea is to not pay you but keep you using them as processor for as long as possible.  Perhaps even 3 months if they can string you along that long. 

The Fall 

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 our introduction fee as a cheap insurance policy.

Click here to find out about a real offshore merchant account from a large offshore bank.