Chargeback Rates: When Is It Too Much for Bail Bondsmen?

Running a bail bonds agency is a lot riskier than your typical business for a lot of reasons. For one, your clients are at odds with the law and you’re putting money to bail them out of jail.

Trust is already a serious issue here because you’ll never know when these clients would jump bail and cause you to lose a huge amount of money. Being a bail bondsman also means that you’re dealing with potentially dangerous and unpredictable people who might lash out or even hurt you if they are not satisfied with your service.

But most of the time, the biggest issue that a lot of bail bonds agencies face is the skyrocketing chargeback rates due to disputes from clients who want their money back. So when is it too much for your business?

The Industry Standard Chargeback Rate

As a general rule, the industry maximum is 1% of all your monthly transactions or only one chargeback per 100 orders. Anything higher than 1% could put you in hot waters against merchant processing companies, especially the big providers like MasterCard and Visa.

If you incur higher chargebacks, you’ll instantly be categorized as a “high-risk merchant,” and that could make things harder for you in a lot of ways. That percentage, however, will also depend on the type of product or service that you’re offering to clients or the nature of your business.

The Issue With Friendly Fraud

Created to protect the rights of consumers, credit card chargebacks had good intentions at first. But as people learned more about its process and the potential benefits they can get from it, a lot of these consumers also found ways to abuse the system, which gave birth to what is now called “friendly fraud.” This tactic happens when a client files for a chargeback even if he doesn’t have any issues with the transaction just to get his money back.

Since most businesses don’t want to go through the hassles of a chargeback, they usually offer a refund in good faith to the client and lose money in the process. Friendly fraud is very common that it makes up 70% of all credit card fraud cases today.

The Threshold for Chargeback Rates

So the big question is: at what point does a chargeback rate become unacceptable for a bail bondsman? Again, that 1% is the industry standard, but that’s already the absolute threshold for chargebacks, which means that you should avoid getting to that number at all costs. Each bank or processor has its own rules for determining if you’ve reached your limit or not.

Aside from that one percent, merchant processors and banks will also look at your chargeback history. If they see that there are more months where you have zero or low chargeback rates, they could be more considerate of those times when you have higher rates.

The volume of your transactions will also help you get some consideration since the number of transactions you have in a month could offset that one chargeback you have in that month.

Ryan Kemp( Director of Digital Marketing )

I am passionate about delivering results and helping my clients succeed. With my expertise in SEO, branding, and marketing, I lead the agency’s efforts to create and implement effective strategies that drive business growth. Our all-inclusive approach sets us apart from other digital media companies and ensures that our clients receive the full range of services they need for online success. If you can think of it, we can build it!

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When I’m not helping my team implement new digital marketing strategies, I enjoy playing music, hosting poker nights, reading Stephen King novels, and spending time with my wife and baby daughter.