PayPal

In the traditional credit card processing industry it has always been difficult, if not impossible, to obtain a merchant account for merchants who charge customers in advance for services that they have not yet performed.The type businesses would include such businesses as health clubs, newsletters, or any type service where the consumer is paying in advance for a service that has not yet been rendered.Traditional credit card processors will not accept these types of businesses as credit card merchants unless the business agrees, usually in writing, to charge the customer on a monthly basis instead of billing the customer up front, such as with an annual fee.The reason is simple. Traditional credit card processing companies must abide the rules and regulations set forth by MasterCard and Visa for protection of the consumer. Both MasterCard and Visa provides very strong protection for the consumer. This problem is as follows. What happens in the event that a merchant who has billed a customer in advance for an annual fee for a service, goes out of business.Traditional credit card processors are part of the associations of MasterCard and Visa. When a traditional credit card processor handles the transaction, then the transaction would have been charged directly to the customers credit card. In a typical Pay Pal transaction the transaction if often funded by the customers Pay Pal balance and often the customers checking account as the secondary funding source.So in the case of the transaction that was processed through a traditional credit card processor and the merchant goes out of business, the customer would contact the bank that issued the MasterCard or Visa (or American Express or Discover) and then the issuer of the credit card will then issue a credit to the customer. Then the processor would then in turn issue a "chargeback" to the merchant's credit card processor.The transaction would then get reviewed and a eventually a determination would be made as to whether or not the consumer is entitled to a credit or refund.