Money September 30, 2020

I just lost $135 due to chargebacks

Yousuf J @yousufj

A customer of mine decided today to contact his credit card company and tell them that I fraudulently charged 3 months of service to his card, at $30/month. When this happens, Stripe automatically removes those funds from my account, PLUS it adds in a $15 fee per charge. It all adds up to $135 dollars gone in a minute.

I'm using Stripe and the guidance is basically nil on how to dispute the chargebacks. I have no idea what to submit as "evidence" and I usually end up ignoring the chargebacks. 😭💸

What do you all do to handle chargebacks? Any advice on what to submit?

  1. 5

    Chargebacks are a nuisance but here are some notes to reduce the stress and protect your business.

    1. Always dispute chargebacks. Why? Many payment processors especially stripe will ban your account if you have too many chargebacks.

    2. Check your processes and communication practices with your customers. More often than not chargebacks come not from fraud, but because someone couldn't find the cancel button, or they ordered and the details weren't clear/they didn't read. If either of these are the case then that is your fault, because it's easier for a customer to just click the fraud button on their credit card app, than navigate through a strategically or incidentally hard to cancel subscription on your website.

    3. When fighting a charge back, I choose to reach out to the customer directly, by recorded phone call first and ask them about their experience with the product, purchase, and then the fact that they canceled. In that order so that they establish that they did in fact purchase. Because a dispute is usually if something was fraudulent, if they in fact purchased, and you acquire proof then the dispute is void, and they are now subject to your terms of service and refund policy. From there if I can I'll ask the customer to retract the dispute. Which usually works.

    4. When it comes to submitting evidence for a dispute, you submit, thier receipt, your refund policy, your terms of service, and any other support that you have proving you fulfilled a legitimate sale. Including a link to the audio file of the phone call mentioned above if available.

    5. Have features on your website such as two-step verification, social login, IP logging on transactions, confirmations for email, fraud alerts for cc and user account name mismatching, and avatars. The more profile data points that you have, the more likely that you will deter actual fraud, and also have enough information in the case of a lazy chargeback dispute.

    6. Make sure that your terms of service are easy to find and clear.

    7. Have a return/refund policy, they are needed in your dispute.

    I hope this is helpful to someone.
    This isn't legal advice.
    Read your processors dispute policies, and adjust yours.
    Drink more water
    Stay Dope

    1. 2

      Wow @Malkio, this is great advice. Thanks so much, I'll have to take some time and implement all of this.

  2. 5

    Stripe is pretty bad in handling chargebacks, it's very hard to get your money back.

    The only way to handle it is to prevent bad buyers (fraudsters). That's a pretty complicated topic but with some basic check you can avoid some of them.

    • is the email exist? Is it temporary or disposable?
    • which country, is it the same as the IP?
    • some basic rules based on your product.

    I worked for years in a fraud prevention company, feel free to reach out. I'd be happy to help!

    1. 1

      Hey Xavier, thanks for the advice!

      I was working under the assumption that the user is actually the person who owns the credit card, and they just wanted to get out of the charges without asking for a refund. Is that not a good assumption? I suppose I don't know for sure, but it just seems more likely to me than someone stealing a credit card for this purpose. 🤷🏾‍♂️

      Do those fraud prevention rules still apply if it's that kind of a user?

  3. 3

    Last year Stripe started providing chargeback protection to US and EU businesses. I don't have experience with this feature but it may be worth looking into.

    1. 1

      Yeah, I was about to say...
      I don't get why this wasn't the first thing mentioned.

      I use ChargeDesk, which integrates with Stripe, and their pro fraud protection feature is essential.
      Here's my video on ChargeDesk, for anyone interested:
      https://www.youtube.com/watch?v=tPlf6gEHWDw

      The amount charged is very minor, and the benefits are great all-around.
      I actually had a potential client who made it seem like they were gonna subscribe for a few grand, and Stripe stopped the transaction, because it had a very high rate of fraud.

      Apparently there is a culture of stealing credit card information, and then siphoning it through guys like us.
      They can either use us as filters for other purchases, or just get the direct benefits of services.

      It obviously also protects against clients basically lying.
      Honestly, that feature is better, to me, than even a contract.
      I have this one bounced check that has been pending in the courts for 2yrs+, and I had a contract and everything.

      Much better to just use Stripe, turn-on the feature, and you are good-to go.
      I used PayPal for many four years, but this last year I switched to Stripe, and it's really the best thing out-there.
      Especially if you're using it with ChargeDesk! :D

    2. 1

      That looks interesting! Seems like they're charging 0.4% per every transaction... I suppose that's not too bad, but I wish I could only pay when a chargeback happens. I wonder what Stripe submits as evidence for you when they don't have any of your server logs or user account information.

      Thanks for pointing this out to me! I'll have to look into it some more.

  4. 1

    Have you looked into implementing Strong Customer Authentication (SCA)? Those payments made with SCA are exempt from dispute.

  5. 1

    PayPal also did with me and no way to get my money😭

    1. 1

      Same + chargeback fee ofc on my bill

    2. 1

      Wow, that's terrible. I'm sorry.

      I guess I should be glad Stripe at least has a system to help dispute, even though it's not very clear what to submit as evidence.

  6. 1

    Chargebacks suck, they're super unfair. My payment provider handles them but it usually means they just accept it and charge my account. Basically once it happens it's already too late and like @xavier said the best thing is to prevent it from happening, as nebulous as that is.

    For example, here's how I block disposable/temporary email addressess: https://www.indiehackers.com/post/dont-allow-people-with-these-email-domains-to-sign-up-for-your-saas-21b3637de0

    1. 1

      Wow this is such an important part of my Saas I am SUPER glad I stumbled over this!

    2. 1

      Thanks @Kilian! I wonder if that prevents actual owners of credit cards from abusing the chargeback system to get instant refunds on valid purchases. Do you know if these kinds of measures would help in that case?

      1. 2

        As if the universe wants to mess with me, I just got a chargeback that will set me back 125 usd :( Looks like it could be credit card fraud, so not much I can do.

        If you use a chargeback with an indie hacker, you're a dick. If you use stolen credit cards with an indie hacker, you're a dick.

        The onus is on you as a seller (or your payment provider) to prove it was a legitimate transaction. If the sellers name and the name on the credit card are the same and they haven't requested a refund any other way that's supposedly pretty easy to prove. So if users can only use real email addresses that maybe also has their name in them, it's another point of proof.

  7. 1

    Sorry dude, that really sucks.

    But this would make a really good topic for discussion. Suggestions for preventing fraud and chargebacks?

    1. 1

      Yeah, it does. :( I was pretty happy with this month's revenue for my product and this was like a kick in the stomach.

      Figured I might as well learn about better ways to prevent chargebacks now rather than keep getting hit with them.

      Thanks for commenting!

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