Auto Warranty Merchant Accounts

Auto Warranty Merchant Accounts

Merchants offering extended warranties for automobiles, need proven effective ways to accept payments.  The more ways customers can pay you, the more sales you make.

Auto warranty merchant accounts include multiple payment processing methods to help you capture more revenue from customers.  Including the ability to accept one-time or recurring payments from your customers. 

This article discusses the pros and cons of the various payment processing options commonly used by auto warranty merchants.  And gives you an excellent option to process payments if you need greater flexibility on chargebacks or returned transactions.

Debit / Credit Card Auto Warranty Merchant Accounts

Debit and credit cards are the most popular method of payment for US shoppers.  This is the primary reason auto warranty merchants want to accept cards. 

While it is worthwhile to establish a card processing auto warranty merchant account, there are drawbacks to this payment method that need to be considered.

Payments made with credit or debit or credit cards can be charged back.  While it is easier for customers to charge back a credit card payment than a debit card, both payment methods can be disputed.

Disputing a card transaction is simple & painless for consumers.  The buyer makes a phone call to the card issuing bank asserting that the transaction was not authorized, the service not adequate, or numerous other reasons.  Consumers frequently win chargeback disputes since the banks issuing the cards often side with their customers over auto warranty merchants.   

There are chargeback mitigation services that notify you when a customer calls to dispute a transaction.  At that point you can issue a refund and prevent the transaction from becoming a chargeback.  However, the service does not prevent all chargebacks, so you will inevitably still have some chargebacks occur.

The greatest risk for auto warranty merchants accepting cards is the loss of card payment processing accounts if chargebacks exceed the ratios set by the card brands. 

While we encourage you to accept card payments, consider accepting only debit cards initially to keep chargebacks as low as possible as you grow your payment processing capacity.  Then add credit card acceptance to your processing options once when you are confident credit card chargebacks can be kept low enough to comply with the card brand ratios for chargebacks.

Benefits of ACH Payment Processing for Auto Warranty Merchants

ACH is the lowest cost method of accepting payments.  ACH debits payments from bank accounts and settle the funds to your bank account.  This is like the way debit cards work. 

Because there are no “interchange” fees associated with ACH like there are with card payments, rates for ACH processing at least 50% lower than card processing.  Therefore, your cost of sales is lower when customers opt to pay via ACH, which is a pro for the payment method.

The primary benefit of accepting ACH rather than debit cards, especially for recurring billing, is that ACH is more stable than cards.  Bank account numbers rarely change since consumers seldom change bank accounts.  Therefore, there is no need up update payment data & recurring billing continues uninterrupted.

Compare this with cards.

More than 20% of debit cards are reissued each year.  For a recurring debit card payment to be approved, current card data must be submitted.   

While there are automated card updater services that can be used gather the payment data from a recently reissued card, not all cards can be updated automatically. Your customer service staff then must attempt to contact the card holder directly to get the information, which is labor and time intensive.

And, despite the best efforts, you may still not be able to obtain updated information.  As a result, the money from the recurring payment is lost, impacting your revenue flow.   

Limitations of ACH Payment Processing for Auto Warranty Merchants

While ACH is an extremely stable, low cost method of processing payments, it has limitations.

The most compelling limitation for auto warranty merchants is that revokes (the ACH equivalent to a card “chargeback”) must remain under 0.5%, which is half the number of chargebacks allowed by the card brands.   And returned transactions must remain under 15%.

Auto warranty merchants generally have challenges maintaining these low thresholds.  Chargebacks are a fact of life for most companies in the auto warranty industry.   It is hard enough to comply with card processing chargeback ratios.  And even more difficult to maintain compliance for ACH merchant accounts.


Need More Flexibility on Chargebacks?  This is the Solution.

Despite all your best efforts, you may still be unable to maintain chargebacks under the ratios required by card brands & the ACH network.  And this can impact your card or ACH merchant accounts.

How can companies that cannot comply chargeback ratios continue to accept payments while protecting existing card & ACH merchant accounts? 

Echecks are the solution.


Echecks for Auto Warranty Merchants

Our unique method of processing echecks let you have significantly higher chargebacks & returns than permitted by the card brands or the ACH network.    Transactions are processed similarly to ACH.  The consumer provides bank routing / account numbers and funds are automatically debited from the consumer’s bank account on a one-time or recurring basis.

The processor assumes liability for returns & revokes.  Cleared funds settle to your business bank account, like the way card or ACH transactions settle.

Because the items are processed outside of the ACH or card networks, there is far greater latitude for higher revokes and returns.  Giving auto warranty merchants the ability to accept more payments without worrying about jeopardizing card and ACH merchant accounts. 

 Auto warranty merchants who cannot obtain ACH or card accounts also benefit from an effective way to electronically receive payments from consumers.


 

Additional Benefits of Accepting Echecks

Card and ACH merchant account providers often have monthly caps on volume, limiting the dollar amount that can be processed and stifling growth.  Echecks have no limitations on processing volume and you have unlimited processing capacity.

Ten different banks are connected to the echeck payment processing platform.  Providing you serious benefits. 

Multiple banks mean that you always have processing backup.  If a single bank decides to exit the auto warranty payment processing arena, payments continue seamlessly through the other banks. 

Want more information?   Contact info@NationalACH.com or call 866-ACH-7600 today.

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