I need some information on how creditcard companies work out chargebacks or for that matter paypal also?

Do they temporarily lock your accounts untill chargeback issue is settled or solved?

Also, do they levy some penalty or fee on merchant if a chargeback were to occur?

Well this is a matter which most of us, who host others will come by upon. If your getting into the hosting biz, just ALWAYS double check the orders. Better yet, CALL the customer to verify that it IS in fact the same person. Usually a chargeback = YOU lose money.

I remember a person who sold dedicated servers, he got the order, CC was checked okay. A week later he gets a CHARGEBACK note on his account and found out it was a FRAUD order. So now.. he had to pay for the dedicated server...

As for paypal, I believe they do lock your account till the matter is sorted out. usually by needing drivers licence etc.. faxed to them, so they can verify that it is you.

I believe.. "most" not all, do have a penalty fee if a chargeback is placed. That's why I suggest you always check the IP's, location and better yet, CALL them. Yeah it will cost a bit for long distance, but hey! it saves you the stress

All the best.

Paypal tends to limit your account access until you either add funds, or fax a drivers license or some sort of identification standard position. 99% of the time Paypal are right, the complainers tend to me the scammers

Thats scary, atleast for merchants.

What do they need driving license for? Once they have verified CC of merchant and awarded them Verified paypal acc., what do they need driving license for?

That's what happen't to me once. I spent money on a server and I guess they felt it could be someone, who mabye got into my account and was spending a huge amount on a server. So they locked it down till I sent them my info. I really didn't feel safe sending them anything, though I didn't have much choice. So in the end, after about a week, they activated my account again.

Best plan is to use your CC, because if it does get stolen, you can always close the account and charge everything back. Though I've heard some peoples credit rating gets wrecked in the proccess. So if you plan to get a loan afterwards, good luck!

Yes, you can but only after you lodge complaint with CC company and they block transactions on it. If not, all costs are borne by you evenif CC gets stolen because you didn't intimate the CC company and get it blocked.

And think abt poor merchant who has delivered goods on that transaction which took through stolen CC and the product is irrecoverable.

Paypal is normally pretty reasonable about chargebacks and so on. Normall paypal chargebacks are through a dispute, and they give you like 60 days to resolve it on your own with the customer or prove that the customer received what they paid for. Here are a couple good places that will help lower fraud.


http://www.varilogix.com/ - Automated Callback on all orders.

http://www.pleskbilling.com/order-verification/ - Works great, cross checks many factors on sign-up to help prevent fraud.