Merchant account options for free trial offers still exist

Negative option billing, trial, free trial, “free to pay” offers – these are all terms for a method of marketing that has come under fire – and often for a good reason.  Many businesses use the trial model, but it is most prominent in the dietary supplement, skin care, and software industries. Although placement can be challenging, there are still merchant account recommendations to be made for some sectors, plus payment gateways, chargeback mitigation, and other B2B services that are available to high-risk merchants selling via the free trial model. We recently have learned of a stable, US-based processing solution that allows free trial sales.

Nutra free trial merchant accounts

For supplement and skin care companies that are looking for a credit card processor that allows free trials, the options are there, but they are limited. (Contact us anytime if you would like to discuss your situation). One item that we found surprising at first is that the credit card processors that still allow free trials often only work with start-ups. This may be counter-intuitive to most. Why would a processor just want “newbies?” The answer is pretty simple – start-ups don’t come with baggage. Processors can teach them the right way to do it upfront, and processors do not have to worry about trying to process old “legacy” transactions that may have been sitting in a database for some time while the website owner is looking for new free-trial friendly processing. Free trial offers should be clear, upfront, and run through one single, well managed merchant account.

Not all free trials are as high-risk as others

Marketing a weight loss supplement for “free” then automatically billing customers after 15-30 days is called a negative option. That is high-risk. We often have success setting up payment gateways and recommending merchant accounts for site owners who market this way, but their credit must be decent, their online reputation must be good (or non-existent) and, as we mentioned above, often they need to be a new business with no history.

For software companies and for “pay shipping only” tangible product companies with no automatic recurring billing there are still many places to process. If you sell the same weight loss product mentioned in the paragraph above, but merely send out free trials, with no automatic billing, then we can often find you processing to sell the reorders on pretty quickly- depending on your ingredients and financials. If you sell software and have a “free to pay” model, that also is a lot easier than a negative option supplement is.

Reach out any time for help or advice.

Trial merchant accounts are limited to credit card processors that:

  1. Want and understand the business model and therefore can, and are willing to, mitigate their risks.
  2. Do not already have so many free trial accounts on board already that the risk profile of their portfolio is out of balance. This can mean, at times placement is challenging. At other times, finding a trial-friendly processor can be much more straightforward. If you would like to run a trial offer, please reach out to us anytime for help.

Contact us if you need a referral to a trial friendly merchant account provider and would like to pick our brain about which providers are still open to working with quality trial web site owners. We know the major players in the industry and try hard to keep up with current underwriting practices.

What is “free to pay trial” in terms of e-commerce?

Our primary definition of negative option billing is “any billing practice where the merchant offers a product or service at a discounted rate or “free” and gathers credit card data at the time to automatically bill the customer should they not call to cancel or return the product.” A perpetual automatic recurring billing program generally accompanies this.

Here is an example: a website sells a skin care cream consisting of monthly automatic shipments. To get you to “try out” their monthly service, they offer the first month’s product for only $5. If you like the service, you “simply do nothing, and you will be automatically billed the following month” the full cost of the service, say $60.

This is where the term “negative option” comes in. Customers get billed (the option to purchase) not by taking a positive action like choosing to purchase the full price product the next month, but instead, they get billed for not acting/not actively canceling (negative option). This practice is common in the nutra, or nutritional supplement world, where the first month is offered as “a free trial”, or “pay shipping and handling only” and unless you call to cancel within a short window of time you are billed automatically. After initial billing, customers are charged the following month for a new shipment and each month after that unless they cancel.

Bad practices by some have made it hard for all

Many websites have used this model to take advantage of consumers, poorly disclose terms, gather payment information, and the automatically bill customers who were not expecting future charges. Compounding the ethical issue is the fact that some merchants do a terrible job of answering customer service calls, canceling orders, or even providing a quality product in the first place.

It does not take a stretch of the imagination to realize that this marketing model should be very clearly disclosed, all the legal ramifications should be researched with an attorney, and the cancellation and billing process should be clear, organized, accessible, and efficient to avoid major problems. Processors are now more than ever concerned with the chargebacks and risk associated with this model, and those that still allow this practice, therefore, are extremely cautious of which merchant accounts they place.

We offer some terrific products for folks in the free trial billing world. Our offers and recommendations include the NMI payment gateway which allows you to manage multiple merchant accounts through one login (routing your high-risk products to their high risk, high-cost merchant accounts, and your low-risk products to low risk, low-cost merchant accounts automatically for example). We also offer world class chargeback prevention and mitigation tools through a combination of Verifi and Ethoca, two leaders in chargeback prevention.

Please contact us for a payment gateway set-up, a chargeback mitigation program, or an introduction to a credit card processor still accepting free trial websites. Regardless of your situation, we are always happy to help with some insight and friendly advice.