Load Balancing: Everything Online Merchants Need to Know
Load balancing - an efficient strategy to prevent chargebacks or unnecessary risk? Learn in this article.
Merchants in e-commerce are probably acquainted with the term “load balancing.” This practice, called volume distribution, involves using multiple payment companies to spread out your transactions. This tries to keep any single account from exceeding limits set by card companies, which can cause chargebacks. However, this isn't a perfect way to manage risk for your business. It tries to hide problems instead of fixing them, which can get you in trouble with card companies and even the law. This article explains how load balancing works and why some businesses might try it. We also discuss safer ways to avoid exceeding limits without taking unnecessary risks.

Load Balancing: How It Works
"Load balancing" distributes transactions among multiple merchant accounts with different payment processors. This aims to lower the risk of excessive chargebacks for any single account, a crucial concern for many businesses. Exceeding chargeback limits, or even operating close to them, has serious repercussions. Beyond increased fees and penalties, businesses could lose their ability to process payments entirely.
Chargeback thresholds vary based on the card brand, payment processor, and specific industry.Generally, merchants are expected to limit monthly chargebacks to 100 and maintain a chargeback-to-transaction ratio below 1%. Due to these restrictions, load balancing might seem like a simple way to avoid trouble. For instance, if one account has 50 chargebacks and a 0.6% ratio, and another has 55 chargebacks and a 0.75% ratio, exceeding the limit is likely if all activity occurred on a single account. However, load balancing is not a viable solution. In fact, it can severely damage your business. This deceptive practice carries severe consequences that can be difficult or impossible to recover from.
What Sellers Usually Consider Load Balancing?
While load balancing might seem appealing, especially if recommended by peers, it's crucial to consider its suitability for your specific business needs carefully. While beneficial for some, it's often most relevant for companies with high-risk merchant accounts, such as those operating in industries with inherently high chargeback rates or those with a history of non-compliance.
Load balancing should not be considered a viable solution for most businesses. It is an underhanded practice that undermines the integrity of the payment processing system and poses significant risks to your business's long-term viability and sustainability.
By engaging in load balancing, businesses jeopardize their financial stability and tarnish their reputation within the industry, making it difficult to recover and operate effectively in the long run. Therefore, it is crucial to prioritize compliance with card brand rules and seek legitimate and sustainable solutions for managing chargeback risks.
The Impact of Load Balancing on Businesses
Load balancing is a deceptive practice that attempts to circumvent card brand rules and limitations by artificially distributing transactions across multiple merchant accounts. This practice not only violates card brand agreements but also raises serious concerns about fraudulent activity. Engaging in load balancing can have severe consequences for your business, including significant financial penalties and potential legal repercussions.
Potential risks of load balancing include:
- Loss of your merchant account(s). Payment processors may terminate your existing accounts.
- Placement on the MATCH list. This industry blacklist can significantly hinder future payment processing.
- Difficulties in obtaining new merchant accounts. It may become challenging to secure new processing agreements.
- Fines from card brands. You may face substantial penalties for non-compliance.
- Legal and regulatory actions. The Federal Trade Commission (FTC) or other agencies may take legal action against your business.
- Business closure. In extreme cases, load balancing could lead to the closure of your business.
Load balancing exemplifies a short-sighted and ultimately self-destructive approach. While it offers a temporary solution to chargeback problems, the long-term consequences can be devastating. By engaging in this practice, businesses risk losing their ability to process payments, facing severe financial penalties, and potentially facing legal action.

How to Avoid Chargeback Risks Without Load Balancing?
While some might consider load balancing a sufficient strategy to manage the company’s finances, in reality, the risks of this practice outweigh the potential rewards. Fortunately, there are several strategies merchants can implement to resolve the present issues while avoiding the dangers caused by load balancing. Here, we present simple yet efficient tactics for ecommerce sellers that will help manage resources effectively and safely.
Inspect Your Data
Data-driven insights are crucial for understanding and mitigating chargeback risks. By analyzing your transaction data, you can identify the root causes of customer disputes and proactively prevent them. Key questions include: Do digital goods have higher chargeback rates than physical products? Are recurring payments more prone to disputes than one-time purchases? Do international customers have higher chargeback rates than domestic customers? Are specific price points or marketing tactics more likely to trigger chargebacks? Are your chargebacks primarily due to "friendly fraud" (unintentional disputes) or malicious activity?
Beyond simply avoiding excessive chargebacks, data analysis provides valuable insights for optimizing your overall business operations. This includes improving product quality, refining customer policies, enhancing customer service, and implementing more effective fraud prevention measures.
Develop a Comprehensive Chargeback Management Strategy
Chargeback prevention techniques offer a safer and more profitable alternative to load balancing, particularly when integrated with other risk mitigation solutions. By leveraging the data collected by chargeback prevention software, businesses can significantly enhance their ability to dispute and win chargebacks, minimizing revenue loss.
Furthermore, chargeback management tools can be effectively combined with channel segmentation strategies. This synergistic approach leverages the proactive protection and valuable analytics provided by intelligent chargeback technology to optimize revenue further and minimize risk across different sales channels.
Invest in Chargeback Prevention Tools
Manually managing chargeback disputes is an excellent tactic for large transaction disputes. However, spending time on smaller ones or collecting all the necessary data to argue the chargeback transaction is insufficient. That’s when chargeback prevention applications, such as Germius CRM, come in handy. While effectively managing customer-company relations, this system allows you to prevent and automatically resolve fraudulent disputes, ensuring the financial security of your business. You can enhance your protection by utilizing fraud detection software to identify and block unauthorized transactions, blacklisting unreliable cardholders to prevent recurrence of fraudulent transaction attempts.
While relying on chargeback prevention systems notifications and automatic dispute resolutions, don’t forget to employ address verification service (AVS) and card verification values (CVV) to verify shopper identity. By combining these solutions, you can create a comprehensive defense against chargebacks.
Load balancing can seem like a simple solution to an existing problem. However, only a proactive approach can efficiently resolve the present ecommerce issues. By analyzing their data, developing data-based strategies, and investing in time- and cost-saving automatic solutions, merchants can ensure the financial safety of their business while avoiding potential legal repercussions and reputation damage.
Final Word
While load balancing might appear to offer a quick fix for chargeback issues, it is short-sighted and ultimately detrimental. By prioritizing data-driven insights, investing in robust chargeback prevention tools, and developing a comprehensive chargeback management strategy, businesses can effectively mitigate chargeback risks, improve operational efficiency, and ensure long-term success. This proactive approach safeguards against potential penalties and account closures enhances customer satisfaction, and strengthens overall business performance.