Entrepreneurship & Small Business

eCommerce - USA customers get payment declined

  • Last Updated:
  • Jul 18th, 2018 2:41 pm
[OP]
Newbie
Jul 12, 2018
4 posts

eCommerce - USA customers get payment declined

Hi,

I have an eCommerce website and a high percentage of my customers are from the States. The problem I am having is that when they try to make a credit card payment, the transaction is declined by their bank and they have to call their bank to authorize the transaction. This happens to 60%-70% of my US customers. The bank tells them that it is because their system has flagged the transaction as high risk partly because it is an out of country business. Understandably, a lot of customers don't continue with the purchase and even if they do, it is an awful waste of time and bad customer service. I have maybe 1 charge back every 2 months. Does anyone else experience this? Is it normal? What can I do to eliminate or at least reduce the instances this happens? Any recommendation is most welcome.
20 replies
Deal Guru
Aug 2, 2010
12480 posts
3035 upvotes
Here 'n There
I don't know if it is normal or not, but it appears to be for you. To avoid this set up a US-domiciled business bank account with BMO Harris (no SSN or TIN required just your Canadian corp info and free if you keep a $1,500 average monthly balance) and then a US-domiciled credit card processor. There will still be a small percentage of purchases declined even under this method but it will be more like 1-2%. Transfer the funds from BMO Harris to BMO Canada by depositing a cheque or doing a wire transfer. Use a Canadian bank and credit card processor for your Canadian business.

That's what I do.
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
Are your deposits going into a CAD or USD account?
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
eonibm wrote:
Jul 14th, 2018 8:53 am
USD, as I said: set up a US-domiciled business bank account with BMO Harris
Yes, I saw what you wrote. I was asking the question to OP.
Deal Guru
Aug 2, 2010
12480 posts
3035 upvotes
Here 'n There
gamechanger wrote:
Jul 14th, 2018 10:38 am
Yes, I saw what you wrote. I was asking the question to OP.
Oh. But how does it matter? Being out of country is the problem.
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
eonibm wrote:
Jul 14th, 2018 6:58 pm
Oh. But how does it matter? Being out of country is the problem.
I have a 100 or so clients selling into the US, with no issues. They all have a USD account in a Canadian domiciled bank. Therefore, I would suggest that it’s either OP’s merchant account, or bank account that is causing the issue.
Deal Guru
Aug 2, 2010
12480 posts
3035 upvotes
Here 'n There
gamechanger wrote:
Jul 15th, 2018 8:29 am
I have a 100 or so clients selling into the US, with no issues. They all have a USD account in a Canadian domiciled bank. Therefore, I would suggest that it’s either OP’s merchant account, or bank account that is causing the issue.
It's costing your clients a fortune in cross-border fees, which all credit card companies charge, when they could be avoiding those fees at no cost to them.
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
eonibm wrote:
Jul 15th, 2018 11:25 am
It's costing your clients a fortune in cross-border fees, which all credit card companies charge, when they could be avoiding those fees at no cost to them.
It’s not so cut and dried...depending on card type, a merchant may pay Interchange rates of almost 3% on some US cards. Add their assessment fees, provider markups, and other fees that are specific to the US...suddenly the effective rate is hitting 3.25%. Yes, cross border assessment fees are high 0.80%-0.925%, but Canadian interchange US cards is never higher than 2.0%. Rates under these circumstances are very similar and merchant doesn’t have to setup a US account, do wire transfers, or anything else.
Deal Guru
Aug 2, 2010
12480 posts
3035 upvotes
Here 'n There
gamechanger wrote:
Jul 15th, 2018 6:02 pm
It’s not so cut and dried...depending on card type, a merchant may pay Interchange rates of almost 3% on some US cards. Add their assessment fees, provider markups, and other fees that are specific to the US...suddenly the effective rate is hitting 3.25%. Yes, cross border assessment fees are high 0.80%-0.925%, but Canadian interchange US cards is never higher than 2.0%. Rates under these circumstances are very similar and merchant doesn’t have to setup a US account, do wire transfers, or anything else.
Your information must be out of date and/or incorrect. I am averaging about 2-2.4% depending on the month and card mix all in. Setting up a US account is easy peasy and you only do it once. You also don't need to do wire transfers but merely deposit a cheque into a BMO Canada USD account. BMO doesn't even put a hold on it for me and it costs me nothing, not to mention it is faster than a wire. I have deposited cheques for over $100K USD with no hold. I am not paying the currency exchange fee either as I use Norbert's Gambit. The system your clients use is costing them a pretty penny compared to what they could be doing with ease. I don't know how your clients are set up but I know that Americans like to buy in USD currency.

However, each to his own.
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
eonibm wrote:
Jul 15th, 2018 6:42 pm
Your information must be out of date and/or incorrect. I am averaging about 2-2.4% depending on the month and card mix all in. Setting up a US account is easy peasy and you only do it once. You also don't need to do wire transfers but merely deposit a cheque into a BMO Canada USD account. BMO doesn't even put a hold on it for me and it costs me nothing, not to mention it is faster than a wire. I have deposited cheques for over $100K USD with no hold. I am not paying the currency exchange fee either as I use Norbert's Gambit. The system your clients use is costing them a pretty penny compared to what they could be doing with ease. I don't know how your clients are set up but I know that Americans like to buy in USD currency.

However, each to his own.
My information is neither out of date, or incorrect. Just because you average a certain effective rate, it doesn’t mean that other business types would as well. US interchange is far more complex than Canada...I do agree that Americans like to buy in their own currency.
[OP]
Newbie
Jul 12, 2018
4 posts
Thanks for responding. I have been reading your comments on other threads about opening an account with BMO Harris, I can do that. I don't have a US address, is a US-domiciled business bank account enough to open a US-domiciled credit card processor? Thank you very much
[OP]
Newbie
Jul 12, 2018
4 posts
The deposits are going into my RBC USD account. mmm yeah, my problem could be my merchant account. Can you recommend me a merchant that your clients are using? or do you work for a merchant? If so, which one? Thank you very much
Jr. Member
Feb 18, 2014
178 posts
28 upvotes
BlueKnight234 wrote:
Jul 16th, 2018 6:00 am
The deposits are going into my RBC USD account. mmm yeah, my problem could be my merchant account. Can you recommend me a merchant that your clients are using? or do you work for a merchant? If so, which one? Thank you very much
Are you currently processing with Moneris?
Deal Guru
Aug 2, 2010
12480 posts
3035 upvotes
Here 'n There
gamechanger wrote:
Jul 15th, 2018 10:02 pm
My information is neither out of date, or incorrect. Just because you average a certain effective rate, it doesn’t mean that other business types would as well. US interchange is far more complex than Canada...I do agree that Americans like to buy in their own currency.
But how do you even know unless they have tried it? For physical consumer products that are not in certain specific high risk categories the rates are the same. The interchange is not complex at all.

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