Negative option billing, trial, free trial, free to pay offers – these are all terms for a method of marketing that has come under fire recently. The trial model is used in many industries, but it is the most prominent in the dietary supplement and skin cream word. There are still merchant account recommendations to be made, plus payment gateways, chargeback mitigation, and other B2B services available to these particular high-risk merchants.
Trial merchant account options are limited to credit card processing companies that:
- Want and understand the business model and therefore are able to, and willing to, mitigate their risks
- Do not already have so many trial merchant on board already that the risk profile of their portfolio is out of balance
– Contact us if you have a need for 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 merchants. We know the major players in the industry and try hard to keep up on current underwriting practices.
What is a “trial” in terms of e-commerce?
Our basic 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 in order to automatically bill the customer should they not call to cancel or return the product”. This is generally accompanied by a perpetual automatic recurring billing program.
Here is an example: A merchant sells a business opportunity training program (biz op) consisting of weekly training videos that teach you how to make money online. In order to get you to “try out” their monthly service, they offer the first month’s training for only $1 (a classic $1 trial). If you like the service you “simply do nothing, and you will be automatically billed the following month” the full cost of the service. This is where the term “negative option” comes in. The customers are 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 are billed for not acting (negative option). This practice is also common in the nutra, or nutritional supplement world, where the first month is offered as “a free trial”, or “pay shipping and handling only” where unless you call to cancel within a short window of time you are billed automatically the following month for a new shipment and each month thereafter unless you cancel. Many merchants have used this model to poorly disclose terms, gather payment information, and the automatically bill customers who were not expecting to be billed. Compounding this 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 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.
Here is a helpful link to some High-Risk Preliminary Questions that you should be prepared to answer honestly and clearly if you are looking for a negative option merchant account through any provider.
We offer some terrific products for folks in the trial billing world, including 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 Ethoca, a world leader in chargeback prevention.
Please contact us, or call us anytime for a gateway set-up, a chargeback mitigation program, or even an insiders scoop as to which credit card processors are accepting negative option merchants. Regardless of your situation we are always happy to help with some insight and friendly advice.