Have I been charged twice?

So what was the most popular email I got from my customers during the holiday rush? Well, it was an email that went a little something like this:

Hey, you guys charged my credit card twice for the same order! I want the second charge reversed immediately or I’ll…

Have you gotten that one yet? Of course, most are much more polite, but some go on to threaten calling their credit card company and the BBB. I tell you, I must have gotten this email fifty times or more in December alone. Here is the interesting part; I didn’t double charge one single customer. Not one. So why all the emails? Let’s take a look.

How credit cards work

We first need to understand how credit cards work. When a customer enters their information on your site, the system sends for an authorization. Basically, it’s alerting the credit card company that there is a charge coming, making sure that there is room on the card for the transaction, and checking the billing address information. You’ll be alerted if the billing address doesn’t match, or if the authorization is declined for any other reason. The credit card company, in turn, leaves a temporary “charge” on the account, to hold the money while waiting for the actual charge. Keep in mind that no money has changed hands at this point. All that’s happened so far is the retailer’s system has said “Hey credit card, we’ve got a charge coming for $50, everything look good on your end?” And the credit card; “Yeah, looks good here, we’ll hold it for you, let us know.”

At this point, you as the retailer will complete the sale, and at the end of the day, your credit card batch will process. The credit card company will then see that an actual charge has gone through, and will move the temporary charge to an actual charge. This is when the money actually moves. All banks are different, but each will keep the temporary charge open for a set amount of business days. If a real transaction never comes through (due to the order being canceled or something) they will delete the temporary charge off the system. No harm done. Follow me so far?

Why does my customer think they’re being charged twice?

Most customers do not understand the difference between a temporary transaction, and a real transaction. Most of the time when a customer says they’ve been charged twice, it’s actually true that the card has been authorized twice. Now I’m not a banking expert, so I won’t pretend to know all the reasons that this happens, because I’m sure there are tons. One of the big reasons is that the original authorization came back with a billing address problem (AVS mismatch). So you corrected the billing address, and tried again. Resulting in two authorizations. Again, there are a million scenarios where more than one authorization could post. The point is that they are temporary.

When the credit card company sees that you’ve sent in one “real” transaction for that card, they should delete the extra authorization off the account.

How to respond

This didn’t used to be a problem. Before everyone had online access to their credit card statement, people used to look only at their paper statement. Well, the paper statement only shows real transactions. It doesn’t show pending authorizations, like they do online. So when you get this customer email, a little education is usually all that’s needed.

I send an email like this:

Mr/Mrs. Customer,

Thanks for your note about the double charge on your credit card. We only show one charge in our system for your order. Your bank just authorized the charge twice (they both probably say something like “pending”). Nothing to worry about, it happens all the time. Once they see that we only charged your card once (which won’t happen until tonight), they’ll delete the other authorization off the system. Hope that helps.

Conclusion

Customers don’t always know the ins and outs of the business world. Truthfully, before you were a merchant, you didn’t know much about it either. People get really touchy when it comes to money. But a quick message that explains what has happened usually takes care of it.

Any New Business Takes Time

I’ve decided that my absolute favorite thing is to respond to comments or questions on the site. Here’s one I got a few weeks back:

Any success stories to share? I’m not sure if it’s worth it to quit my job to start a webstore solely dependant on drop ship wholesaler. I’m a breadwinner for my family, and no income for a few months would be too disastrous – Bizman.

Whoa Bizman. Slow down. As a husband, father, and breadwinner, your comment scared me. Always use extreme caution when quitting your job to start a business. Unless you have a ton of capital or financing, it will usually always be awhile before making any money, especially enough to support a family.

I’m not sure why you’d want to do this anyway. One of the biggest advantages of a drop ship business is the fact that it is relatively easy to set up, and can certainly be run in your spare time on the weekends and in the evenings. I assume that you are fed up with your job, and that’s why you have considered this drastic move. Rather than jumping in with both feet, I encourage you to take it slow. Get started, and let your business grow before quitting your day job.

Remember, drop shipping is very competitive. The goods are easily obtained, so the margins are typically much less than traditional retail. While I’m sure it’s happened here and there, the chances of starting a drop ship business today, and making a sustainable income within a few months is slim.

What is MAAP?

Many suppliers will mention MAAP when setting up an account. They may even ask you to sign an agreement stating that you’ll abide by their MAAP policies. Well, what the heck is MAAP and why is it important to me?

What is MAAP?

MAAP stands for (I believe) Minimum Allowed Advertised Price. Basically they are saying that you can not openly advertise the price of an item lower than the MAAP requirement. Suppliers and manufacturers use this in an attempt to protect their products from discounting which aims to protect their brand’s reputation. They don’t want retailers selling their products for dirt cheap because that will eventually cheapen the brand and make it harder for anyone to make any margin on the products.

Why As A Drop Shipper Should I Care?

Because if a supplier has a MAAP requirement, and you are found violating it, you run the risk of loosing the privilege of selling the item, or in extreme cases, risk a lawsuit.

Is it legal?

In a word, yes. Keep in mind that a supplier can not tell you what you must sell an item for. That is called price fixing, and it is 100% illegal. But there is a big difference between price fixing and MAAP. Price fixing dictates sales price (again, illegal), MAAP dictates advertised price. You can still sell the item for whatever you want; you just can’t openly advertise it for less than MAAP.

The way around it

Ever go to an online store and it says “call for pricing”? Or something like: “the price is so low we can’t show you. Add it to your cart for the price (you can always remove it later)”? Well those stores are going around the MAAP requirements on those products. They are not advertising the price, but will tell you if you ask, either by calling in or adding it to your cart (considered intent to buy). The call in method is relatively simple to implement if you have a call center or some kind if customer service. The add to cart method is a little more difficult and would take some extra coding or software to work on most store platforms.

Conclusion

My feeling is that MAAP is very confusing to the consumer. Most don’t even know what it is. So sites that use one of the above methods probably lose some trust. It’s hard enough to get customers to buy, but when you add an extra step, many will just go somewhere else. In practice, I generally just put the actual price I’m offering. If it happens to be too low, I just move the price up to MAAP and move on. Consumers like to know their price up front, and any time it seems to be hidden, you’ll lose more than not.