Charge backs happen. Ideally, they don’t happen often. But it’s important to know how to deal with them when they do. The charge back is the “nuclear option” for the customer who wants a refund. Rather than requesting one from you, they send their bank in like a financial cavalry to demand it on their behalf. Usually, the bank is temporarily covering the customer’s refund with their own money, so it’s in their interest to use their considerable resources against you.
Usually, charge backs come from customers who are looking for a way to skirt your refund policy (assuming you have one; more on that later). They’ve missed the window for a refund, or they haven’t met the (hopefully clearly) stated terms to qualify for one. Sometimes it’s an honest mistake; they don’t recognize the charge, or forgot they signed up for your service, But mostly, they come from customers who feel entitled to a refund that’s outside the normal scope.
The good news is, you can fight the bank, assuming you’re in the right. More importantly, you can prevent charge backs from happening with some pretty basic pre-emptive strategies.
The Black-and-White Defense
The absolute best way to defend against charge backs is to keep them from happening in the first place. This is accomplished by having clear, precise terms and conditions in place that spell out your refund policy. A well articulated, airtight policy that lays out specific terms is the best way to win a refund dispute before it occurs. Somewhere before checkout, the customer should have to acknowledge and accept your terms and conditions. We’ve all checked that box when making an online purchase. It’s there for a reason!
For example, our policy at WebinarNinja is that the service is free for the first 2 weeks. After this trial period ends, the customer is charged. This is spelled out very clearly in our terms and conditions. When a customer is charged on that 15th day, there’s not much of an argument to made for deciding they don’t want the service anymore and demanding a refund. The key is to eliminate the element of surprise. If the customer isn’t surprised by the charge, then you’re not likely to be surprised by a charge back!
Keep Thorough Records
Be organized with your business correspondence, especially concerning purchases and refund requests. Keep a thorough record of emails, support requests and tickets, and every other kind of correspondence. With all of this information saved and time-stamped, it shouldn’t be difficult to resolve disputes in your favor.
This is especially important for your payment processor’s sake. A charge back differs from a refund in that instead of the customer getting a refund from you, the bank is demanding one from whatever payment processor you’re using. This creates a hassle for the processor as well as yourself. To make it easier for them (and maintain good relations between your business and theirs), make it as easy as possible to deny the refund. Have your stated terms and conditions plus your correspondence organized and easily accessible. Be able to present the evidence as soon as the question is raised. Be efficient, and it’ll pay off when you need it to.
Take It In Stride
The worst thing you can do in the event of a charge back is nothing. If you don’t fight it, the customer will more than likely get the refund. This not only costs you money, it can affect your reputation— as well as your relationship with your payment processor. It’s extremely difficult to reverse a decision in favor of the customer, so stay on top of it. If the customer is in the wrong, you can’t let your business suffer for it.
Charge backs don’t have to be a major issue. If your terms are clear, your records are tight, and your customer service is good, they should be a rarity. When they do occur, it’s still possible to resolve in a way that takes the banks and processors out of the equation. If possible, reach out to the customer who’s requested the charge back and see if you can work things out.
There may be a simple mistake on their part that you can clear up. There may be a mistake on your part that actually warrants a refund. If so, it’s better to handle it privately, without the hassles that come with an official charge back. Either way, maintaining communication with customers from start to finish is the best strategy. If you do so, the sailing will be much smoother.