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Ask HN: How do you handle chargebacks?

6 points by ThaddeusQuay2 ↗ HN
I am launching a startup soon. The most pressing problem is how to collect money. The fine print at Google Checkout, PayPal, and WePay indicates chargeback fees of $10, $20, and $35, as well as language to the effect that even a single chargeback could result in my account being frozen or closed. I don't mind the occasional chargeback, if a person genuinely could not get satisfaction from me, but I wonder if this could be a way for a competitor to attempt to shut down my business. I'm not saying that this is likely to happen, but it has occurred to me that a competitor could simply purchase a number of prepaid credit cards, and use each, from its own email address and IP address, to make purchases from my website, and then, for each purchase, complain to my credit card processor that I've done a lousy job in servicing their order. I'm not trying to be paranoid here. I honestly don't know how to make it easy to accept credit cards while avoiding the potential for such a situation. Thanks, in advance, for any useful suggestions.

5 comments

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brk
You're over thinking the problem.

The merchant processor does not want chargebacks either, so when a chargeback is initiated you get a document describing the chargeback reason, and they generally ask the card holder to have some proof that they attempted to contact you to rectify the issue but did not get satisfaction.

So, run your business. Do a good job, concentrate on your company. Chargebacks won't be an issue unless you re doing something horribly wrong.

JeffL
I'll tend to get something like 0.1% in charge backs nearly all through Pay Pal. I just pay and ignore them.

Note, when a person requests a charge back through Pal Pal, Pay Pal will ask them to prove their side, and I don't remember the person ever doing it successfully. The successful people initiate the charge back via their credit card company and Pay Pal always accepts those and charges me.

ig1
My startup has a policy of no-questions asked refunds, if a customer wants a refund for any reason whatsoever they'll get it.

We've had around 500 customers and not a single customer has requested a refund yet.

codeslush
Chargebacks are a pain to deal with. I was involved in a business for six years, and had to deal with this situation on occasion. I noted a pattern: 90% of the chargebacks were initiated by AMEX customers. AMEX makes it very convenient and easy for a customer to request a chargeback. It can sometimes be "I don't recognize this charge/company..." -- and that's really frustrating. You don't have much time to respond to the request either. If you are legit, you'll generally win the disputes, but you have to respond and have your tracks covered. Small businesses aren't always organized enough to respond in time and lose these disputes simply because the response wasn't a priority. I actually think there is an opportunity for someone to tackle this problem (streamline the process, have template responses, backed by business specific data points, etc...).

If you have too high of a chargeback ratio, you will get cancelled. I think you might be worrying about something that you don't need to worry about. As long as you are providing a real service/product and not out to rip people off, you will be fine.

bschiett
what products are you going to sell? it really depends on the product.

if it is a physical product, just keep proof of sending the order on file such that you can prove to paypal that you've sent the goods.

if it is a digital product I recommend you get a specific service to deliver the product and handle the transaction, such as shareit, clickbank, digital river, ... they know what to do with chargeback for digital products.