> What I don’t understand is why some people can’t just reach out and request it — instead of going straight to a chargeback.
Customers don't want to "reach out" if it means hunting deep in their account settings to find the cancel button, or calling a number which may or may not lead them through an endless phone tree to waste 5 minutes talking with someone on the retention team reading from a script.
People don't remember they signed up.
They can't remember how to log in from a different device to cancel.
It's easier to use their credit card app to dispute the charge.
The company name is different than the product name - even a slight difference may indicate a scam, like all of these highway toll scams using a slightly different domain name.
A worker or family member signed up using someone else's card, and that person has no idea what the charge is for.
People expected one thing from your SaaS product, and got something else that they are not willing to pay for.
They rarely check or read their email.
Your account reminders are going straight to spam.
The communications around the product, pricing, or requirements was lacking.
What I don't understand is why my banking app does not show a "cancel subscription" button with the payment.
When I click that button, the recurring payment is automatically canceled, and the SaaS company can check that and know that I unsubscribed. Or something along these lines.
There is already a power-asymmetry between consumers and companies. This should not extend to unsubscribing. Here, the consumer should have all the power.
The reason isn't technical. This isn't implemented because the entire card-processing ecosystem is hooked on the chargeback fees (min $15 to $100). It starts becoming a lucrative revenue stream for Visa/Mastercard/Stripe/Adyen/WorldPay/Fiserv and the entire ecosystem.
Merchant's end up getting the short end of the stick in most cases.
Thats how it works in India. All authorized repeating charges ("mandates") are listed on a portal maintained by the card issuer. you can go in anytime and simply cancel the mandate from there. This is mandatory under banking regulations.
Credit cards are also required to be "tokenized" when stored at a merchant or payment aggregator - the user authorizes the bank to allow the merchant or the aggregator to "store" the card details for use later, and the bank then issues a card token, tied to the specific merchant/aggregator. They are not allowed to store the original card info at all - just this token. This makes the token not worth stealing, as it can be only used by that merchant, and is trivial to de-auth if needed, with or without merchant cooperation.
Banks are barely running on a modern stack, let alone doing anything userful within banking, and you want them to build an api to cancel an outside service? :)?
Neobanks definitely have this feature. For example Revolut. There’s a “Block future payments” button, and once you click it, no more charges from that merchant will go through.
The requested feature is more like list-unsubscribe headers for mailing lists[1]. Instead of categorizing the mail as spam (blocking) you send a clean unsubscribe back to the sender.
How would this be tooled? A chargeback, a deep link to the cancel page, an API connection between bank and subscription?
Chargeback is easy because it's under the card co's control. Deep link would require knowing the cancel page of every sub, plus handling auth factors. API connection would two way integration, with scoped auth between every bank and every service. Hopefully managed by an SI or aggregator, but the business model sounds hard (the bank doesn't mind the chargeback, the SaaS doesn't want the cancelation, so who pays?)
Visa/MasterCard/Amex already support such a facility in India due to RBI requirements. Doesn't seem too difficult to adapt similar functionality for other countries too, if the regulations are updated to require it.
> How would this be tooled? A chargeback, a deep link to the cancel page, an API connection between bank and subscription?
I'd be happy to just have the ability to easily ask the credit card company block further payments with no actual notification to the business besides that the monthly charges stop going through. If you want to be fancy about it, creat a custom industry standard declination reason for that use case.
Considering they are placing the charges in the first place, it would seem like it would just need to be a response code, not a convoluted network of extensive new development like you suggest.
Integrations are usually one-way (merchant calls bank API), but it's not beyond the bounds of practicality to keep a handle on whatever UID was assigned to the recurring payment in the first place, then send the merchant "by the way this subscription UID requested user cancellation".
Yet the majority of businesses use dark patterns to avoid cancellations because it's hugely profitable to do so. Chargebacks are expensive, but the truth is that the majority of customers never leverage it, and often just endure years of paying for products they don't use. Maybe they tried to cancel to find that while they could sign up in seconds online, cancelling invariably requires a call (to a number that, wouldn't you believe it, has higher than normal call volumes!) into some maze of retention garbage.
What a world we would be if companies didn't want to bill customers that don't use their product. Imagine if companies automatically paused billing if you stopped using their product? Panacea.
Apple is a hugely greedy company, but it's one thing I like about subscribing to things in there -- I can cancel at any time with minimal effort.
As I mentioned in the article, this is extremely rare for us, but it has happened a couple of times. And that’s where I start having questions and frustration about the process itself.
It constrains liquidated damages to a reasonable figure. But it doesn’t prevent them. As for selling a debt to a collector, that seems perfectly reasonable, particularly if the customer made no effort to cancel.
I am acutely aware that it constrains liquidated damages to a reasonable figure. Conveyance to a collector is, of course, customary in the trade.
The problem is that a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages. See, 356 cmt. a.
If you didn’t say “punitive” in the LD provision, you’d have the “reasonable estimate” conversation but GP straight up called it a punitive clause, which is not going to fly (in many jurisdictions, ianyl, etc. etc.)
> a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages
Would note that the Restatement isn’t law, but an influential guideline. As long as the punitive terms are clearly agreed to, they ought to be able to fly. (Particularly if made in exchange for money, e.g. pay a premium to opt out of punitive cancellation.)
> the result are chargebacks it just means things cost more in general
shrug. That's just the way it works.
Make it easier to unsubscribe than doing a chargeback. Your competitors who do that will have a lower cost and be able to undercut you and you'll go out of business.
> Make it easier to unsubscribe than doing a chargeback. Your competitors who do that will have a lower cost and be able to undercut you and you'll go out of business.
How do you know people aren't already doing so? It's not about the competitors but the industry in general.
Have you not read the post I was replying to?
I quote:
> People don't remember they signed up.
> They can't remember how to log in from a different device to cancel.
> It's easier to use their credit card app to dispute the charge.
> The company name is different than the product name
> A worker or family member signed up using someone else's card
> People expected one thing from your SaaS product
> They rarely check or read their email
Sure there were other points, but more than 50% of the list is about the customer having their own problems. It's like having a bad actor in the system making it worse for everyone.
Exactly. This is what I want all my subscriptions to do.
In UPI (I know I know...) there is an autopay system. Your single UPI app has a single page with all your subscriptions. You can cancel or do whatever there and it's all handled in one place. My openai, streaming services, youtube premium, amazon prime, everything is on there. It gives me notifications before a charge is about to occur. No dark patterns.
This is the standard I expect.
Since credit cards don't provide a centralised thing like that, it's up to the SaaS provider to give the equivalent experience.
Cancelling should be _exactly_ as easy as signing up. If that means your MAU doesn't increase as fast, maybe you have a shit product. Case in point: amazon prime can have cancel buttons littered all across every page and I'm still not gonna cancel it.
Here's the simplest implementation:
Few days before and on the day of charging, some infobox on the app's most attention-requiring screen, and an email telling me I'm gonna be charged. In all those communications, the main CTA should be a cancel button, that without further ado, let's me confirm and cancel the thing.
Anything even one step more complicated is a dark pattern.
Someone downthread mentioned - what if they want to change their subscription level instead of cancelling? In that case, two CTAs: change plan, and cancel. Both equally sized and right next to each other with good color contrast - important! None of that greyed out cancel button bullshit.
I don't want to be messing around with "forget my password", or having to remember what email I set up for it.
> some infobox on the app's most attention-requiring screen, and an email telling me I'm gonna be charged
Nope, I no longer log in (because your app was crap, or because I accomplished my goal). Fine I lost $10
If I log in every day or two chances are I want to keep it going. It has to be an out-of-band communication with the ability to cancel in a frictionless way, which means no account hijinks
I very rarely refund anything, but when I do, I send a single email that I want a refund and if it isn't done promptly I will chargeback. It's usually the best customer service I get. No security questions, no Indian call centres, no "are you sure" questions. I don't blame people for just hitting the dispute button though. Years of piss poor customer service has conditioned it.
We always issue a refund if a customer asks, or at least try to find a compromise if the payment was made a very long time ago. In that case, it’s usually more about a pro-rated refund.
But recently I asked for a refund from a very popular project management system, and it was a nightmare, an absolutely terrible experience. After that, I gained a new level of respect for our own support team ))
"Banks almost always side with the cardholder, even when we provide clear logs and evidence."
-- sigh unfortunately it's the opposite in 3rd world countries like Indonesia. I've had my cards physically stolen on the airplane. Despite having all the evidence and common sense ("I'm in city X airport and the disputed transactions happened in city Y, you're saying I went there immediately after landing and return to the airport just to queue for immigration, all in an hour?"), none of the banks accepted my chargebacks that I filed few hours after incident.
The banks are Bank Mega (national, private), BNI (state-owned) and DBS.
I just created an account, and the subscription page in the app shows a $50 charge, while the public pricing page shows $10 with 'Minimum 5 seats' in small letters.
Your post says about $10 charge, I am not sure how it happened with current flow.
Be very direct about the pricing, and please use your own product so customers are not confused.
In the post I mentioned that we build several products. I didn’t want to list them all, because I always feel a bit awkward about self-promotion. My goal with the post was to spark a dialogue, not to advertise.
RE pricing page: yes, we do state that there’s a minimum of 5 seats. But there are no chargebacks here, since we don’t take a card upfront and we don’t bill in a hidden way. In the worst case, if you missed or didn’t read that detail, you can simply decline and not subscribe after the trial. You’ll see the price in Stripe before giving us your card. And if you prefer, you can stay on the free plan for up to 5 ppl.
> But there are no chargebacks here, since we don’t take a card upfront and we don’t bill in a hidden way. In the worst case, if you missed or didn’t read that detail, you can simply decline and not subscribe after the trial.
This is a dark pattern. You should display the actual minimum monthly charge in text that is at least as large as the price per user.
No, the worst case is the customer gets the $10 price into their head and then doesn't see the actual monthly charge amount when they subscribe. You are now charging the customer 5x what they expected to pay.
I run a business that handles food festival entry/payments and I loathe chargebacks. It's not even my money, it's the festival that loses out but I hate them with a fiery passion. It's not even that much money, we are talking less than 0.05% of total payments (if not lower) but it makes my blood boil.
Why? Because it's 100% fraud. I've personally reviewed every case most of them are filed under "duplicate charge". When I review their account I see something like this:
- Loaded $10 on account
- Spent $3
- Spent $5
- Loaded $10 more
- Spent $6
- Spent $6
And they decide to dispute the second $10. Even when I can show exact timestamps of all their purchases/reloads the banks don't care. They don't care they they got the product and are scamming the festival. They just don't care.
And before "I can see how someone can make that mistake when they see 2x$10" sure... but then why not reach out to support (buttons are on every page to reach out directly to me through a form and I respond in <1hr normally)? People suck and so do the banks (all of them) that allow this fraud to continue.
As shown here, when someone charges back on a $10 you _immediately_ lose $15. No matter what, $15 is gone, so now you are $25 in the hole (plus Stripe fees) before you even get started. At _best_ you can recoup $10 but history has shown that the chances of winning are next to 0 and at best you end the day with -$5.
But wait! There's more! Stripe added _another_ fee of $15 if you try and counter which you will get back only if you win the dispute (which you won't).
So, if you charge someone $10 and they do a chargeback that you fight and lose you are out $40+ ("+" because of the Stripe fees on the original payment). It's just absurd. If you don't fight it you are out $25+ and if you fight it and win you _only_ lose $5.
Add a warning email 24 hours before the transaction. In the subject put "You'll be charged $10 for renewal in 24 hours".
> we also provide a simple, self-service way to cancel the subscription
It's hard to comment without seeing screenshots and description of the process. When people are cancelling under a perceived threat (will be charged otherwise), any inconvenience will become an extreme one.
Email about an upcoming charge is automatically sent a couple of days in advance, that’s Stripe standard feature. The other question is whether the user actually check their email (or which email they registered with).
As for cancellation, the problem is that even though it’s easy to cancel a subscription, chargebacks usually happen afterwards. It doesn’t matter how simple cancellation is, what matters is that the user first cancel and then still goes and files a chargeback.
I’ve been recently hit with my first chargeback. The first thing I learned, you pay the chargeback fee no matter what.
The second thing I learned, you pay a fee if you intend to respond.
Basically, from what I understood, a chargeback is a lose-lose situations for the business. If the cost of the transaction is less than the two fees, it’s better to let chargeback settle in customers favor. Otherwise, you risk losing both fees, as the chance for winning a chargeback is very small (from what I learned).
I had a customer who used a “wrong credit card” (read: a corporate card that they had access to). I reached out to the customer asking them why they filed a chargeback, they told me “sorry, used the wrong card, the owner filed for chargeback”.
I didn’t bother to file the counter argument. Just blocked the customer, and ate the fee.
Enable 3D secure, this _might_ help with chargeback protection. And as someone said, enable Radar, it costs extra. There are also service that automatically refund the customer when they “intend” to file. Basically, stripe sends you a webhook when chargeback is about to arrive, so you can refund, this avoiding the chargeback fee.
I’d say if a chargeback does happen, the chances of winning =0, unless you can convince the customer to withdraw it. I realized this especially after my last dispute, where I was 100% sure I would win. But that’s it. I have no faith in the process anymore. What’s left is just the internal struggle, I always want to respond to something unfair and try to prove my case. But here it’s not worth doing.
We have very few chargebacks, not even 10 in 10 years and we consider us lucky. Stolen credit card happens more often than chargeback. I don't attribute it to better messaging or easier cancellation options, we do the same as many others, I guess it's just the type of product of customer.
Even in HN comments I've seen people saying they use temporary card numbers (valid for one transaction only) or click a button to dispute instead of a single email. That button in the banking interface might be "block future payments" or such. They must've bad experience with companies in the past?
Actively emailing with the customer sometimes helps. It worked for us. Sometimes it didn't. For example if it's a company credit card and the employee left the company. Their accounting team simply doesn't know what our service is for.
At this point the fees are part of "cost of doing business".
Depending on your country / ticket, you have a 24 hour cooling off period, easy to call phone numbers, self serve web platforms and apps, very well documented processes and procedures.
Most of the worst airlines have some of these things, because if they didn't, they wouldn't be allowed to operate in certain regions (Canada/US, EU)
It just takes one bad experience. For me it was a local kids’ dance studio. I signed up through their portal, but my daughter didn’t like it. I forgot to cancel the recurring charge for a couple of months, no response to my emails. I filed a chargeback. The next month they charged me again, so I did another instant chargeback.
They finally reached out asking why. I told them we hadn’t even shown our faces there for months. But the following month they charged me again, and again I charged it back. This cycle repeated a couple more times.
I was angry at first as a small software provider. Then you understand there is nothing to be done and you budget it so it becomes the cost of doing business.
The most common charge back case is when a customer loses its card and the bank charges back all the transactions of the past X days no matter what. It is stupid but a lot of banks do it instead of asking the customer which transactions are legitimate.
Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error? If I try to cancel and it doesn't work, I'm not gonna waste time trying to figure out how to work around it or filing a bug report. I'm gonna go straight to the charge back.
Is your cancellation mechanism consumer friendly? You don't do proration when people cancel and say you only "meet them halfway" when they go through the effort of requesting a refund in response to this user hostile policy.
There are a lot of very user unfriendly policies and implementations. Sometimes companies that legitimately try to do the right thing get caught in the blowback, but more commonly, companies aren't as user friendly as they like to pretend and have adopted at least some of the pervasive dark patterns.
>Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error?
This happened to me once with a meal planning app (Eat This Much). I did validly cancel and get a cancellation email, but Stripe had errored out (I didn't realize this) and I ended up disputing the charge with my credit card because I couldn't get a hold of them (they had just done some UI changes that unfortunately broke their in-app contact function).
In the exit survey, I mentioned I was disappointed that they chose not to honor my cancellation request. Their support person reached out to me to let me know that they couldn't refund me without me dropping my dispute, but my dispute was already marked as resolved by my bank. I guess they issued a courtesy credit and didn't want to deal with the back-and-forth internally.
I sent them the cancellation email that I had received proving my cancellation. I'm pretty sure if I hadn't received that email, they would've cursed me up and down as one of these "anti-social chargebackers", because it confused them enough that their CEO personally emailed me to apologize; they found the Stripe error in their logs, it had only happened one other time in recent history, and they wouldn't appeal my dispute as a result. They did offer me a free month, but I really did want to cancel - it just wasn't working for me, but at least they were nice about it.
I'm sure without that added context, the story would've been the same as this post - yet another person charging back and not reaching out first to explain. I was pretty angry about the situation at first (having no knowledge it errored out or that they would be more willing to refund me than deal with my chargeback), but they were a small team, they were nice about it, and I dropped my interest in posting a public complaint about it.
I remember this! Sorry again for the frustration >_< We made our Stripe API requests a little more robust after this happened.
We do get a fair number of disputes like the author where customers will cancel after getting billed, and then dispute it, even though we always give refunds to people who email and ask for one. It also feels like there's been a significant up-tick in recent months of disputes like these, maybe a reflection of the current economic climate. Hard to blame the customer though, for all the reasons listed by the top comment -- sometimes it's just easier to do it through the bank than figure out how to cancel through an app you forgot you even subscribed to.
Haha, I'm amused you remember. I went back in my emails and it happened back in 2018. I was a not-so-eloquent college student back then. I appreciated that you both handled it with grace and kindness - sorry if I sounded irate at the time, and hope you're doing well these days. :)
I'm probably missing something but I never got the Merchant being on the hook for the chargeback. It should be the Credit Card Processor's liability for fraudulent charges (unless the merchant is actually at fault). If a stolen card is used to make a purchase, why is the merchant on the hook for this?
I would suggest not requiring customers to write you for a refund. My company automatically refunds the most recent payment if the subscription is canceled within 7 days of renewal. The invoice email that we send when the subscription renews tells the customer how to get a refund. Chargebacks still happen (rarely), but if your company had this policy it would have prevented the first chargeback you mention.
This is something good about the Apple AppStore, they handle the chargebacks and no ridiculous fees incurs(When a refund request is initiated, they will send you a consumption info request over API to ask for your opinion but ultimately its their decision and its handled by them). That's why I don't have a problem with Apple's cut as they handle something that's actually quite complicated and annoying. Their control over the content(what's allowed) is another story though, of course.
You can't exactly charge back the AppStore because you risk losing your entire account. I'd much prefer every app be billed separately because then I CAN request a charge back, without fear of literally losing my entire phone, house access, etc.
Your definition of good, is my definition of a prison.
As a customer, your business model isn’t my problem. I’ve had numerous frustrating experiences with cancelling these and similar things. If you make it a chore, even in the slightest way, chargeback. Suck it up.
Life is hard enough and I have enough things to do that actually require energy and focus, and I refuse to spend any of it trying to convince you that don’t need your SaaS product.
Well, I treat other companies and people the way I’d like to be treated myself. Knowing that a chargeback is unpleasant and creates extra costs, I always first write to their support.
I treat other people like that, absolutely. Companies are not people and you can tell by the way they treat you.
The way a lot of businesses try to exist in this superposition between being "just pals!" when things are going their way but if you try and resolve a problem, they immediately start quoting policies and legalese is really off-putting tbh.
That's the point, I don't subscribe to the idea that %30 is ridiculous if you don't have a full blown department to handle that. Can be argued that Apple should give people that option but for anyone who minds being charged $43.95 for transaction that goes badly will be beter off to pay Apple and have piece of mind as long as their margins allow that.
I would prefer to be charged $3 for every 10$ if I'm not ever going to get involved in this and the money will hit my bank account the first week every month. I would prefer to get charged $43 for 1 in every 100 transaction if I employ people who handle that for me.
So the $43 thingy is more like at least $3000 + (43$ per 1 in 100) and (2$ + %3) per + handling VAT remittence per + handling local laws per(which means you will likely need a few more highly specialized employees or services that you pay hefty cuts approaching Apple).
Taking money from people anywhere in the world in exchange for your product or service is trivial on Apple because they indeed employ a lot of people that deal with this stuff, thus %30 is fair IMHO.
Merchants can use FraudLabs Pro to screen orders and assess their fraud risk. To combat friendly fraud, merchants can blacklist customers to block them from making future purchases.
Suing for $43 would absolutely be frivolous and would be thrown out by all but the most bored small claims courts.
The best you could do is send your client to collections, though if you try and mess with their credit report, that incurs liability on your part. Funny enough, German companies do send SaaS/IaaS clients with small bills owing to collections, even for amounts as small as 15-20 EUR.
UK perspective here: I've not claimed for $43, but I've used the small claims process to recover £65. They replied to the paperwork sent out by the court indicating they intended to defend it, so I paid the hearing fee to take it to court, where the judge was polite, helpful, very switched-on, and didn't seem remotely annoyed by the size of the claim.
The total costs of making the claim were more than the amount I'd claimed, but I'd been careful to provide all the proper notice and offer to settle for the amount of the claim, so they were awarded against the defaulting client.
It was great fun and I think it would have been fun and educational even if I'd lost. Would definitely do it again.
The problem is that chargebacks are like the perk of using a CC for transactions. So if companies start doing this to an any degree that makes CC customers hesitant to use the CC's customer protection feature they will find a way to make it the merchant's problem again.
The best you can really do is be large enough that cutting ties with your business entirely isn't feasible for the customer.
I know for sure that if users start filing complaints against you with Apple, they can simply ban your account entirely and for long. Some companies never recover from that and end up shutting down.
AMEX was/is the old-school equivalent of this. They would unapologetically ban merchants from accepting AMEX (forever!) after even a handful of complaints/chargebacks. This is also a key part of why you see some shops/restaurants with the "no AMEX" signs on their terminals -- don't be fooled by the "AMEX is too expensive to accept" red-herring, the actual difference for AMEX vs Visa/MC is ~1%[1], really not enough to matter for most businesses.
[1] Average brick-and-mortar interchange fees for Visa and MC range 1.85% to 2.6%, AMEX is 2.5% to 3.3%.
Anecdotal, but every small business owner I've talked to have said it's because of the 1% difference in fees, even with OptBlue.
I've only had 1 business owner ever say it was due to chargebacks, a small tea shop in a Chinatown in Canada. They also don't take Mastercard for the same reason.
This is also why American Express launched the Cobalt card in Canada, which had a 5x multiplier for eats, drinks and groceries, and pushed it so hard for years on social media and bus shelters, despite eventually starting to disincentivize it (it was a loss leader/upgrade feeder product for Amex). They wanted to win merchants back with a new generation of hip, social media savvy Amex customers.
AmEx also does not pay the merchant as quick as Visa and MC. And 1% is a significant cut for most retail businesses, as they have low single digit profit margins.
Are you sure? I am not referring to Apple’s App Store, I am only referring to the Apple Pay payment mechanism, which presumably is a relationship between the payment processor and Apple.
The bank would still be the one dealing with chargeback and chargeback related costs, I do not see why Apple would care or get involved.
However, I wonder if the biometric verification of Apple Pay merits a different response to chargebacks where the bank will not simply take the buyer’s side.
Sorry, I probably misunderstood and confused things. I was of course talking about the Apple App Store, when users file complaints about the app itself.
No, as far as I know. But as a merchant, in theory you can block that customer from making future payments. But probably only their specific card or email.
TL;DR:
We run multiple SaaS products on Stripe. Even with clear renewal reminders, invoices and easy cancellations, some users skip refunds and go straight to chargebacks.
A $10 payment ended up costing us $43.95 recently. Banks almost always side with the cardholder, and the only reliable “win” I’ve seen is when the customer withdraws the dispute themselves.
So here’s my question to the community:
What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?
What actually prevents someone from using a SaaS product, filing chargebacks every time they cancel, and essentially getting refunded for the last several months of usage?
I assume if you are running multiple SaaS you already discovered this - but the expectation is that you will amortize the cost of a chargeback into your price if you are a legit business.
Card-not-present (I.E. internet transaction) has a lot more merchant fraud then friendly fraud (what we call these cases) and the incentives for both merchants and banks is to make sure the customer never loses trust in the system.
If people were afraid to use their cards on the internet everyone loses.
It doesn't make sense for both the merchants and the banks to arbitrate every 10$ transaction. I doubt your case even reached a human, or if it did they even gave it a minute of thought - you are just someone who does not know the rules to them.
Now if a customer abuses the chargeback mechanism, he'll have is card revoked, probably be blacklisted and his life would be an insane amount of complicated from now on.
But you'll never see these cases. Be sure that if someone could abuse the chargeback mechanism to the extent you mentioned, the system would be unusable, the fact you get chargebacks only rarely is a testemant that there is policing going on at the bank side.
It's just not 100%. Like Patio11 says - the optimal amount of fraud is non-zero[1]
If you have a large chargeback (let's say 1000$ and more) you might actually get someone to review it, and there's a slight chance you'll win if the case is good. But the system is not geared for that.
It's geared towards you amortizing the cost of chargeback into your price - and eventually the people who pay it is always the customer, not the merchant.
> What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?
they have a banking relationship with their client, and none whatsoever with you
if they decline the chargeback they then take on a load of risk (they might lose their client, they might get reported to the regulator, they might be sued by their client and then stuck with the bill)
but if they just pass it on then you take all the pain
not surprising at all given the structure of how credit card payments work
Just consider it cost of doing business and move on. You can also offer discounts for alternative payment methods but something tells me cards will be more attractive.
Yes, that’s pretty much how I look at it. And in all of our products I do everything possible to keep chargebacks to an absolute minimum, sometimes even making decisions that aren’t the most profitable from a business perspective.
When I look at some other companies, I often see all kinds of "shady" tricks that clearly boost revenue, but also inevitably increase the number of cases like this.
The credit card business of banks wants customers to spend money so they earn transaction fees. Everything the bank does is in service of this goal. Making it harder to do chargebacks would measurably reduce the transaction fees they earn in aggregate.
Your SaaS is a dime a dozen to them. They dont care about you. You dont make them any money, especially when the customer is actively trying to stop doing business with you.
My niche SaaS (monthly subs, no annual) gets about 1 or 2 chargebacks a year.
I give instant refunds, we are very lenient with our terms, and I've made the unsubscribe flow 2 clicks from email or dashboard (want to cancel? click. Are you sure? click. Done. Confirmation email). Every subscription email also includes short instructions on cancellation.
Even with a very customer friendly posture, the chargebacks fall into three categories:
- bad experiences with other companies, so instant chargeback instead of emailing or calling
- miscommunication between customer departments (accounting doesn't know about the subscription and chargeback)
- fraud or lying about usage
We've won about 50% of the chargebacks disputes. I recently added an admin interface that has a chargeback defense function that compiles evidence into a handy package I can upload to Stripe to dispute.
This could also be from fraud. Card testing for example, where they aim to figure out missing card details. Or some other nefarious use of stolen card details.
Yes, we’ve had a few cases where people tried card testing through us. But we noticed quickly and introduced the proper limits. In general, if you redirect the user to Stripe Checkout after clicking Subscribe button, all of that should be handled by Stripe itself and not affect your account. I guess ))
But this is a slightly different story. With chargebacks, almost every time it was just a customer not wanting to admit fault. What’s strange is that they could have simply written to us and asked for a refund. But I guess they realized they were in the wrong, so instead of contacting us, they went straight to their bank.
Yep so strange given it is never easy to get a charge back. Doing one now and it is like pulling teeth. I would heavily chase up a traditional refund before doing a charge back. I suspect some banks are making it too easy.
Yes for me it is last resort. Email chains go nowhere. Mentioned consumer protection laws but nothing. It's the next step before small claims court. Not having a fun day if doing a chargeback. It's very rare.
I’ve always considered the chargeback the last resort “burning the bridge” action. Problem is that merchants lately are getting way worse about customer support.
I’ve been a credit card user for 30 years, and in the first 25 of those years, I only had to resort to chargeback once. In the most recent 5 years, I’ve had to do it about 3 times. Companies in general are just way less responsive now and take their customers for granted way more than in the past.
It boggles my mind that this is a surprise. Let's start with this:
> What’s really going on here?
Reality. You need to prove something: that the card holder made the purchase to the standard the banks set and you can't. It's as simple as that.
> Why do banks completely ignore the terms customers agreed to when they subscribed or in cases where they’re clearly making false claims?
Because your agreement with the customer is not the only agreement in play. You accepted these chargebacks and that process when you accepted credit cards.
> And why aren’t customers required to provide any proof at all?
You can't prove a negative. I can't prove I didn't authorize payment. And, because it's online, you can't prove I did. "logs, screens, terms, full context" are not proof. None of that is useful or proof in any way that the card holder made the purchase.
> What actually prevents someone from using a SaaS product, filing chargebacks every time they cancel their subscription, and essentially getting refunded for the last several months of usage?
Credit card number limitations. Why would you accept a payment from the same credit card number again? Also, repeat offenders can be blocked by payment providers. This is the way a lot of online stores work.
> Would love to hear your thoughts.
A few more points...
> "The Madness of SaaS Chargebacks"
It's not SaaS chargebacks. It's just chargebacks.
> The worst part is that it doesn’t matter whether you win or lose a dispute — the very fact that it was filed still counts against your account.
Yes. The reason it counts is because you are problematic, or at least attract problematic customers. This ends up costing the banks money. I'm sorry, but if you had a problematic customer that cost more money than you made from them, you'd probably stop working with them, too.
> Still, we always submit evidence.
Not the evidence that matters. You need evidence that the card holder authorized the payment. I promise you, nothing you submitted proves that.
> Inside the product, we also provide a simple, self-service way to cancel the subscription without any questions asked.
Do you ask for the username and password? Right... and if I didn't sign up for the service to begin with, I didn't agree to the TOS.
Let's also address one more thing:
Facts:
> Charge was processed August 12 (regular billing cycle).
> Subscription canceled August 18 (6 days later).
> Dispute created August 19.
> The claim is false.
Nope. The problem is when the person requested the subscription be cancelled. Not when your system recognized it.
> the customer doesn’t have to prove anything
The problem is when a customer requests you cancel their subscription, and you say you will, and you don't do it until 6 days later.=
The problem is when a customer goes to request to have their subscription cancelled, and your service is broken and doesn't recognize the cancellation and they don't realize it never cancelled until 6 days later.
I can keep going.
Let's try this: prove to me the customer didn't submit a request to cancel the subscription when they said they did.
That's right, you can't prove a negative.
I can keep going on, but you can find lots of information on this and why it is the way it is. If you don't want to deal with this, there are other options that eliminate or reduce the chance of chargebacks. But you won't find those as popular. Because they aren't customer friendly.
There's quite a few promising less cancellations, less churn but I haven't seen less chargebacks yet. Usually they tell you to give customers offers during cancellation, e.g. a discount, months free, anything so they don't click the final "cancel now" button.
They're mostly just typical UI/UX or business consultancies trying to fit their way in the niche by offering vague advice and "data-driven analytics" services. I don't have a great deal of confidence that the average business analyst couldn't do better, but some companies don't trust their staff and need to pay someone to tell them otherwise.
> What I don’t understand is why some people can’t just reach out and request it — instead of going straight to a chargeback.
Customers don't want to "reach out" if it means hunting deep in their account settings to find the cancel button, or calling a number which may or may not lead them through an endless phone tree to waste 5 minutes talking with someone on the retention team reading from a script.
People don't remember they signed up.
They can't remember how to log in from a different device to cancel.
It's easier to use their credit card app to dispute the charge.
The company name is different than the product name - even a slight difference may indicate a scam, like all of these highway toll scams using a slightly different domain name.
A worker or family member signed up using someone else's card, and that person has no idea what the charge is for.
People expected one thing from your SaaS product, and got something else that they are not willing to pay for.
They rarely check or read their email.
Your account reminders are going straight to spam.
The communications around the product, pricing, or requirements was lacking.
What I don't understand is why my banking app does not show a "cancel subscription" button with the payment.
When I click that button, the recurring payment is automatically canceled, and the SaaS company can check that and know that I unsubscribed. Or something along these lines.
There is already a power-asymmetry between consumers and companies. This should not extend to unsubscribing. Here, the consumer should have all the power.
The reason isn't technical. This isn't implemented because the entire card-processing ecosystem is hooked on the chargeback fees (min $15 to $100). It starts becoming a lucrative revenue stream for Visa/Mastercard/Stripe/Adyen/WorldPay/Fiserv and the entire ecosystem.
Merchant's end up getting the short end of the stick in most cases.
Thats how it works in India. All authorized repeating charges ("mandates") are listed on a portal maintained by the card issuer. you can go in anytime and simply cancel the mandate from there. This is mandatory under banking regulations.
Credit cards are also required to be "tokenized" when stored at a merchant or payment aggregator - the user authorizes the bank to allow the merchant or the aggregator to "store" the card details for use later, and the bank then issues a card token, tied to the specific merchant/aggregator. They are not allowed to store the original card info at all - just this token. This makes the token not worth stealing, as it can be only used by that merchant, and is trivial to de-auth if needed, with or without merchant cooperation.
I love love love this comment.
Banks are barely running on a modern stack, let alone doing anything userful within banking, and you want them to build an api to cancel an outside service? :)?
Love this so much, most HN comment ever :)
PayPal does this. It's one of the greatest features they provide. Hardly an impossible feat.
they just stop payment, that isn't cancelling
your bank really doesn't offer stop payments?
nope, and that isn't cancelling
Neobanks definitely have this feature. For example Revolut. There’s a “Block future payments” button, and once you click it, no more charges from that merchant will go through.
Yes, but this is not a correct way to unsubscribe. They might for instance still send a bailiff to collect their money.
What I'm talking about is an official way to unsubscribe. One that the user fully controls, and is free of dark patterns.
What if you want to change your subscription level, rather than unsubscribe?
The requested feature is more like list-unsubscribe headers for mailing lists[1]. Instead of categorizing the mail as spam (blocking) you send a clean unsubscribe back to the sender.
[1] https://www.twilio.com/en-us/blog/insights/list-unsubscribe
How would this be tooled? A chargeback, a deep link to the cancel page, an API connection between bank and subscription?
Chargeback is easy because it's under the card co's control. Deep link would require knowing the cancel page of every sub, plus handling auth factors. API connection would two way integration, with scoped auth between every bank and every service. Hopefully managed by an SI or aggregator, but the business model sounds hard (the bank doesn't mind the chargeback, the SaaS doesn't want the cancelation, so who pays?)
Visa/MasterCard/Amex already support such a facility in India due to RBI requirements. Doesn't seem too difficult to adapt similar functionality for other countries too, if the regulations are updated to require it.
* https://www.visa.co.in/about-visa/newsroom/press-releases/vi... * https://pgi.billdesk.com/web/sihub
> Deep link would require knowing the cancel page of every sub, plus handling auth factors.
All it needs is a "payment refused, user canceled service" response to billing and not to flag the billing attempt as fraud.
> How would this be tooled? A chargeback, a deep link to the cancel page, an API connection between bank and subscription?
I'd be happy to just have the ability to easily ask the credit card company block further payments with no actual notification to the business besides that the monthly charges stop going through. If you want to be fancy about it, creat a custom industry standard declination reason for that use case.
> an API connection between bank and subscription?
This already exists. Mastercard (and Visa?) has an API that lets banks notify subscriptions when your card changes to update the card number https://developer.mastercard.com/product/automatic-billing-u...
This is another instance where we clearly need a regulator to make things work better for the consumer.
Considering they are placing the charges in the first place, it would seem like it would just need to be a response code, not a convoluted network of extensive new development like you suggest.
Integrations are usually one-way (merchant calls bank API), but it's not beyond the bounds of practicality to keep a handle on whatever UID was assigned to the recurring payment in the first place, then send the merchant "by the way this subscription UID requested user cancellation".
> Customers don't want to {blah blah blah}
If this is the way it works and the result are chargebacks it just means things cost more in general (cost of business will be factored in).
It's not a good thing.
Yet the majority of businesses use dark patterns to avoid cancellations because it's hugely profitable to do so. Chargebacks are expensive, but the truth is that the majority of customers never leverage it, and often just endure years of paying for products they don't use. Maybe they tried to cancel to find that while they could sign up in seconds online, cancelling invariably requires a call (to a number that, wouldn't you believe it, has higher than normal call volumes!) into some maze of retention garbage.
What a world we would be if companies didn't want to bill customers that don't use their product. Imagine if companies automatically paused billing if you stopped using their product? Panacea.
Apple is a hugely greedy company, but it's one thing I like about subscribing to things in there -- I can cancel at any time with minimal effort.
> Imagine if companies automatically paused billing if you stopped using their product? Panacea.
Beeminder does exactly that!
https://blog.beeminder.com/autocancel
If chargebacks are a significant issue for your business then you are doing something wrong.
As I mentioned in the article, this is extremely rare for us, but it has happened a couple of times. And that’s where I start having questions and frustration about the process itself.
I’ve shared examples in the article.
> this is extremely rare for us, but it has happened a couple of times
Put punitive terms into your SLA. (Though check with a lawyer about adhering to your merchant agreement.)
Charging back doesn’t cancel a contract. If you want to be vindictive, you could sell the debt to a collector.
Restatement (Second) Contracts sec. 356 would seem directed squarely at this bad idea.
It constrains liquidated damages to a reasonable figure. But it doesn’t prevent them. As for selling a debt to a collector, that seems perfectly reasonable, particularly if the customer made no effort to cancel.
I am acutely aware that it constrains liquidated damages to a reasonable figure. Conveyance to a collector is, of course, customary in the trade.
The problem is that a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages. See, 356 cmt. a.
If you didn’t say “punitive” in the LD provision, you’d have the “reasonable estimate” conversation but GP straight up called it a punitive clause, which is not going to fly (in many jurisdictions, ianyl, etc. etc.)
> a “punitive” amount of liquidated damages is neither reasonable, nor would it typically be found to have been the product of an actual estimate of the damages
Would note that the Restatement isn’t law, but an influential guideline. As long as the punitive terms are clearly agreed to, they ought to be able to fly. (Particularly if made in exchange for money, e.g. pay a premium to opt out of punitive cancellation.)
> the result are chargebacks it just means things cost more in general
shrug. That's just the way it works.
Make it easier to unsubscribe than doing a chargeback. Your competitors who do that will have a lower cost and be able to undercut you and you'll go out of business.
That is a good thing.
> Make it easier to unsubscribe than doing a chargeback. Your competitors who do that will have a lower cost and be able to undercut you and you'll go out of business.
How do you know people aren't already doing so? It's not about the competitors but the industry in general.
Have you not read the post I was replying to?
I quote:
> People don't remember they signed up.
> They can't remember how to log in from a different device to cancel.
> It's easier to use their credit card app to dispute the charge.
> The company name is different than the product name
> A worker or family member signed up using someone else's card
> People expected one thing from your SaaS product
> They rarely check or read their email
Sure there were other points, but more than 50% of the list is about the customer having their own problems. It's like having a bad actor in the system making it worse for everyone.
Send an email saying "you're about to be charged, click here to cancel your membership"
Exactly. This is what I want all my subscriptions to do.
In UPI (I know I know...) there is an autopay system. Your single UPI app has a single page with all your subscriptions. You can cancel or do whatever there and it's all handled in one place. My openai, streaming services, youtube premium, amazon prime, everything is on there. It gives me notifications before a charge is about to occur. No dark patterns.
This is the standard I expect.
Since credit cards don't provide a centralised thing like that, it's up to the SaaS provider to give the equivalent experience.
Cancelling should be _exactly_ as easy as signing up. If that means your MAU doesn't increase as fast, maybe you have a shit product. Case in point: amazon prime can have cancel buttons littered all across every page and I'm still not gonna cancel it.
Here's the simplest implementation: Few days before and on the day of charging, some infobox on the app's most attention-requiring screen, and an email telling me I'm gonna be charged. In all those communications, the main CTA should be a cancel button, that without further ado, let's me confirm and cancel the thing.
Anything even one step more complicated is a dark pattern.
Someone downthread mentioned - what if they want to change their subscription level instead of cancelling? In that case, two CTAs: change plan, and cancel. Both equally sized and right next to each other with good color contrast - important! None of that greyed out cancel button bullshit.
I don't want to be messing around with "forget my password", or having to remember what email I set up for it.
> some infobox on the app's most attention-requiring screen, and an email telling me I'm gonna be charged
Nope, I no longer log in (because your app was crap, or because I accomplished my goal). Fine I lost $10
If I log in every day or two chances are I want to keep it going. It has to be an out-of-band communication with the ability to cancel in a frictionless way, which means no account hijinks
I very rarely refund anything, but when I do, I send a single email that I want a refund and if it isn't done promptly I will chargeback. It's usually the best customer service I get. No security questions, no Indian call centres, no "are you sure" questions. I don't blame people for just hitting the dispute button though. Years of piss poor customer service has conditioned it.
We always issue a refund if a customer asks, or at least try to find a compromise if the payment was made a very long time ago. In that case, it’s usually more about a pro-rated refund.
But recently I asked for a refund from a very popular project management system, and it was a nightmare, an absolutely terrible experience. After that, I gained a new level of respect for our own support team ))
"Banks almost always side with the cardholder, even when we provide clear logs and evidence."
-- sigh unfortunately it's the opposite in 3rd world countries like Indonesia. I've had my cards physically stolen on the airplane. Despite having all the evidence and common sense ("I'm in city X airport and the disputed transactions happened in city Y, you're saying I went there immediately after landing and return to the airport just to queue for immigration, all in an hour?"), none of the banks accepted my chargebacks that I filed few hours after incident.
The banks are Bank Mega (national, private), BNI (state-owned) and DBS.
I just created an account, and the subscription page in the app shows a $50 charge, while the public pricing page shows $10 with 'Minimum 5 seats' in small letters.
Your post says about $10 charge, I am not sure how it happened with current flow.
Be very direct about the pricing, and please use your own product so customers are not confused.
https://beeimg.com/view/d3295639248/
I appreciate your attention. Let me explain.
In the post I mentioned that we build several products. I didn’t want to list them all, because I always feel a bit awkward about self-promotion. My goal with the post was to spark a dialogue, not to advertise.
RE pricing page: yes, we do state that there’s a minimum of 5 seats. But there are no chargebacks here, since we don’t take a card upfront and we don’t bill in a hidden way. In the worst case, if you missed or didn’t read that detail, you can simply decline and not subscribe after the trial. You’ll see the price in Stripe before giving us your card. And if you prefer, you can stay on the free plan for up to 5 ppl.
> But there are no chargebacks here, since we don’t take a card upfront and we don’t bill in a hidden way. In the worst case, if you missed or didn’t read that detail, you can simply decline and not subscribe after the trial.
This is a dark pattern. You should display the actual minimum monthly charge in text that is at least as large as the price per user.
No, the worst case is the customer gets the $10 price into their head and then doesn't see the actual monthly charge amount when they subscribe. You are now charging the customer 5x what they expected to pay.
Let me explain, you are advertising something for $10 and selling it for $50.
No wonder you get unhappy customers.
Here are two fixes
> "From $50"
> "$10/user minimum 5 users" in the same font and size
I run a business that handles food festival entry/payments and I loathe chargebacks. It's not even my money, it's the festival that loses out but I hate them with a fiery passion. It's not even that much money, we are talking less than 0.05% of total payments (if not lower) but it makes my blood boil.
Why? Because it's 100% fraud. I've personally reviewed every case most of them are filed under "duplicate charge". When I review their account I see something like this:
- Loaded $10 on account
- Spent $3
- Spent $5
- Loaded $10 more
- Spent $6
- Spent $6
And they decide to dispute the second $10. Even when I can show exact timestamps of all their purchases/reloads the banks don't care. They don't care they they got the product and are scamming the festival. They just don't care.
And before "I can see how someone can make that mistake when they see 2x$10" sure... but then why not reach out to support (buttons are on every page to reach out directly to me through a form and I respond in <1hr normally)? People suck and so do the banks (all of them) that allow this fraud to continue.
As shown here, when someone charges back on a $10 you _immediately_ lose $15. No matter what, $15 is gone, so now you are $25 in the hole (plus Stripe fees) before you even get started. At _best_ you can recoup $10 but history has shown that the chances of winning are next to 0 and at best you end the day with -$5.
But wait! There's more! Stripe added _another_ fee of $15 if you try and counter which you will get back only if you win the dispute (which you won't).
So, if you charge someone $10 and they do a chargeback that you fight and lose you are out $40+ ("+" because of the Stripe fees on the original payment). It's just absurd. If you don't fight it you are out $25+ and if you fight it and win you _only_ lose $5.
Winning never felt so shitty...
Add a warning email 24 hours before the transaction. In the subject put "You'll be charged $10 for renewal in 24 hours".
> we also provide a simple, self-service way to cancel the subscription
It's hard to comment without seeing screenshots and description of the process. When people are cancelling under a perceived threat (will be charged otherwise), any inconvenience will become an extreme one.
Email about an upcoming charge is automatically sent a couple of days in advance, that’s Stripe standard feature. The other question is whether the user actually check their email (or which email they registered with).
As for cancellation, the problem is that even though it’s easy to cancel a subscription, chargebacks usually happen afterwards. It doesn’t matter how simple cancellation is, what matters is that the user first cancel and then still goes and files a chargeback.
> Email about an upcoming charge is automatically sent a couple of days in advance
I'm talking about additional email. 24 hours before the transaction. With the subject "You'll be charged $10 for renewal in 24 hours".
This email will hit a lot harder. Most people's inbox is full of transactional email, as per recent post here on HN.
I’ve been recently hit with my first chargeback. The first thing I learned, you pay the chargeback fee no matter what.
The second thing I learned, you pay a fee if you intend to respond.
Basically, from what I understood, a chargeback is a lose-lose situations for the business. If the cost of the transaction is less than the two fees, it’s better to let chargeback settle in customers favor. Otherwise, you risk losing both fees, as the chance for winning a chargeback is very small (from what I learned).
I had a customer who used a “wrong credit card” (read: a corporate card that they had access to). I reached out to the customer asking them why they filed a chargeback, they told me “sorry, used the wrong card, the owner filed for chargeback”.
I didn’t bother to file the counter argument. Just blocked the customer, and ate the fee.
Enable 3D secure, this _might_ help with chargeback protection. And as someone said, enable Radar, it costs extra. There are also service that automatically refund the customer when they “intend” to file. Basically, stripe sends you a webhook when chargeback is about to arrive, so you can refund, this avoiding the chargeback fee.
I’d say if a chargeback does happen, the chances of winning =0, unless you can convince the customer to withdraw it. I realized this especially after my last dispute, where I was 100% sure I would win. But that’s it. I have no faith in the process anymore. What’s left is just the internal struggle, I always want to respond to something unfair and try to prove my case. But here it’s not worth doing.
We have very few chargebacks, not even 10 in 10 years and we consider us lucky. Stolen credit card happens more often than chargeback. I don't attribute it to better messaging or easier cancellation options, we do the same as many others, I guess it's just the type of product of customer.
Even in HN comments I've seen people saying they use temporary card numbers (valid for one transaction only) or click a button to dispute instead of a single email. That button in the banking interface might be "block future payments" or such. They must've bad experience with companies in the past?
Actively emailing with the customer sometimes helps. It worked for us. Sometimes it didn't. For example if it's a company credit card and the employee left the company. Their accounting team simply doesn't know what our service is for.
At this point the fees are part of "cost of doing business".
https://news.ycombinator.com/item?id=44382686 is an example where a customer was unhappy about merchant charges and seems to contact the banks only, not the merchant.
> They must've had bad experience with companies in the past?
Ever used a gym, airline, or subscribed to a newspaper? Many businesses are genuinely customer-hostile.
I actually find airlines very customer friendly.
Depending on your country / ticket, you have a 24 hour cooling off period, easy to call phone numbers, self serve web platforms and apps, very well documented processes and procedures.
Most of the worst airlines have some of these things, because if they didn't, they wouldn't be allowed to operate in certain regions (Canada/US, EU)
every time i have to book something in the UK / EU, I'm sad there's no 24hr cooloff unlike in the US.
Newspaper and gym, sure.
It's common enough that popular TV programs cover it
https://www.youtube.com/watch?v=oh8PFs0LTKc
Not sure about airlines though.
It just takes one bad experience. For me it was a local kids’ dance studio. I signed up through their portal, but my daughter didn’t like it. I forgot to cancel the recurring charge for a couple of months, no response to my emails. I filed a chargeback. The next month they charged me again, so I did another instant chargeback.
They finally reached out asking why. I told them we hadn’t even shown our faces there for months. But the following month they charged me again, and again I charged it back. This cycle repeated a couple more times.
I was angry at first as a small software provider. Then you understand there is nothing to be done and you budget it so it becomes the cost of doing business.
The most common charge back case is when a customer loses its card and the bank charges back all the transactions of the past X days no matter what. It is stupid but a lot of banks do it instead of asking the customer which transactions are legitimate.
Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error? If I try to cancel and it doesn't work, I'm not gonna waste time trying to figure out how to work around it or filing a bug report. I'm gonna go straight to the charge back.
Is your cancellation mechanism consumer friendly? You don't do proration when people cancel and say you only "meet them halfway" when they go through the effort of requesting a refund in response to this user hostile policy.
There are a lot of very user unfriendly policies and implementations. Sometimes companies that legitimately try to do the right thing get caught in the blowback, but more commonly, companies aren't as user friendly as they like to pretend and have adopted at least some of the pervasive dark patterns.
>Perhaps this is a question you should be asking yourself. Is your cancellation system working? There was a billing session created the day after the initial charge, are you sure there wasn't an attempt to cancel the that the system failed to register and log due to an error?
This happened to me once with a meal planning app (Eat This Much). I did validly cancel and get a cancellation email, but Stripe had errored out (I didn't realize this) and I ended up disputing the charge with my credit card because I couldn't get a hold of them (they had just done some UI changes that unfortunately broke their in-app contact function).
In the exit survey, I mentioned I was disappointed that they chose not to honor my cancellation request. Their support person reached out to me to let me know that they couldn't refund me without me dropping my dispute, but my dispute was already marked as resolved by my bank. I guess they issued a courtesy credit and didn't want to deal with the back-and-forth internally.
I sent them the cancellation email that I had received proving my cancellation. I'm pretty sure if I hadn't received that email, they would've cursed me up and down as one of these "anti-social chargebackers", because it confused them enough that their CEO personally emailed me to apologize; they found the Stripe error in their logs, it had only happened one other time in recent history, and they wouldn't appeal my dispute as a result. They did offer me a free month, but I really did want to cancel - it just wasn't working for me, but at least they were nice about it.
I'm sure without that added context, the story would've been the same as this post - yet another person charging back and not reaching out first to explain. I was pretty angry about the situation at first (having no knowledge it errored out or that they would be more willing to refund me than deal with my chargeback), but they were a small team, they were nice about it, and I dropped my interest in posting a public complaint about it.
I remember this! Sorry again for the frustration >_< We made our Stripe API requests a little more robust after this happened.
We do get a fair number of disputes like the author where customers will cancel after getting billed, and then dispute it, even though we always give refunds to people who email and ask for one. It also feels like there's been a significant up-tick in recent months of disputes like these, maybe a reflection of the current economic climate. Hard to blame the customer though, for all the reasons listed by the top comment -- sometimes it's just easier to do it through the bank than figure out how to cancel through an app you forgot you even subscribed to.
Haha, I'm amused you remember. I went back in my emails and it happened back in 2018. I was a not-so-eloquent college student back then. I appreciated that you both handled it with grace and kindness - sorry if I sounded irate at the time, and hope you're doing well these days. :)
I'm probably missing something but I never got the Merchant being on the hook for the chargeback. It should be the Credit Card Processor's liability for fraudulent charges (unless the merchant is actually at fault). If a stolen card is used to make a purchase, why is the merchant on the hook for this?
>If a stolen card is used to make a purchase, why is the merchant on the hook for this?
Did they confirm the identity of the person matches the card?
If the merchant has no liability, if opens up a whole world of new fraud.
This is essentially why everyone is willing to refund these type of payments when customers reach out.
Sure, and that’s the right approach. We also issue refunds, but for that, the customer needs to write to us and ask.
I would suggest not requiring customers to write you for a refund. My company automatically refunds the most recent payment if the subscription is canceled within 7 days of renewal. The invoice email that we send when the subscription renews tells the customer how to get a refund. Chargebacks still happen (rarely), but if your company had this policy it would have prevented the first chargeback you mention.
This is something good about the Apple AppStore, they handle the chargebacks and no ridiculous fees incurs(When a refund request is initiated, they will send you a consumption info request over API to ask for your opinion but ultimately its their decision and its handled by them). That's why I don't have a problem with Apple's cut as they handle something that's actually quite complicated and annoying. Their control over the content(what's allowed) is another story though, of course.
You can't exactly charge back the AppStore because you risk losing your entire account. I'd much prefer every app be billed separately because then I CAN request a charge back, without fear of literally losing my entire phone, house access, etc.
Your definition of good, is my definition of a prison.
> no ridiculous fees incurs
.. to the user. What do they charge the vendor, or it just the 30% of every transaction (which some might consider ridiculous).
As a customer, your business model isn’t my problem. I’ve had numerous frustrating experiences with cancelling these and similar things. If you make it a chore, even in the slightest way, chargeback. Suck it up.
Life is hard enough and I have enough things to do that actually require energy and focus, and I refuse to spend any of it trying to convince you that don’t need your SaaS product.
Well, I treat other companies and people the way I’d like to be treated myself. Knowing that a chargeback is unpleasant and creates extra costs, I always first write to their support.
I treat other people like that, absolutely. Companies are not people and you can tell by the way they treat you.
The way a lot of businesses try to exist in this superposition between being "just pals!" when things are going their way but if you try and resolve a problem, they immediately start quoting policies and legalese is really off-putting tbh.
That's the point, I don't subscribe to the idea that %30 is ridiculous if you don't have a full blown department to handle that. Can be argued that Apple should give people that option but for anyone who minds being charged $43.95 for transaction that goes badly will be beter off to pay Apple and have piece of mind as long as their margins allow that.
Would you prefer to be charged $43 for 1 in every 100 $10 transactions, or $3 for every $10 transaction?
edit: comment below reminds us that unhappy customers can get you banned entirely https://news.ycombinator.com/item?id=45248686
I would prefer to be charged $3 for every 10$ if I'm not ever going to get involved in this and the money will hit my bank account the first week every month. I would prefer to get charged $43 for 1 in every 100 transaction if I employ people who handle that for me.
So the $43 thingy is more like at least $3000 + (43$ per 1 in 100) and (2$ + %3) per + handling VAT remittence per + handling local laws per(which means you will likely need a few more highly specialized employees or services that you pay hefty cuts approaching Apple).
Taking money from people anywhere in the world in exchange for your product or service is trivial on Apple because they indeed employ a lot of people that deal with this stuff, thus %30 is fair IMHO.
Merchants can use FraudLabs Pro to screen orders and assess their fraud risk. To combat friendly fraud, merchants can blacklist customers to block them from making future purchases.
Controversial take here. Sue your customer. No really.
Banks operate on risk, make chargebacks risky.
Some of these chargebacks sound like straight up fraud. Three months of usage and using their bank to reverse a payment.
Make Fraud Spicy Again
Suing for $43 would absolutely be frivolous and would be thrown out by all but the most bored small claims courts.
The best you could do is send your client to collections, though if you try and mess with their credit report, that incurs liability on your part. Funny enough, German companies do send SaaS/IaaS clients with small bills owing to collections, even for amounts as small as 15-20 EUR.
UK perspective here: I've not claimed for $43, but I've used the small claims process to recover £65. They replied to the paperwork sent out by the court indicating they intended to defend it, so I paid the hearing fee to take it to court, where the judge was polite, helpful, very switched-on, and didn't seem remotely annoyed by the size of the claim.
The total costs of making the claim were more than the amount I'd claimed, but I'd been careful to provide all the proper notice and offer to settle for the amount of the claim, so they were awarded against the defaulting client.
It was great fun and I think it would have been fun and educational even if I'd lost. Would definitely do it again.
Of course we would never do anything like that. In the post I just shared two different cases to give some perspective to the community.
From everything discussed in the article, there are a 2 major takeaways:
1) You need to avoid chargebacks as much as possible.
2) If a chargeback does happen, the chances of winning are basically zero — unless you can convince the customer to withdraw it.
The problem is that chargebacks are like the perk of using a CC for transactions. So if companies start doing this to an any degree that makes CC customers hesitant to use the CC's customer protection feature they will find a way to make it the merchant's problem again.
The best you can really do is be large enough that cutting ties with your business entirely isn't feasible for the customer.
I am curious if Apple Pay has the same chargeback issues for merchants.
I know for sure that if users start filing complaints against you with Apple, they can simply ban your account entirely and for long. Some companies never recover from that and end up shutting down.
AMEX was/is the old-school equivalent of this. They would unapologetically ban merchants from accepting AMEX (forever!) after even a handful of complaints/chargebacks. This is also a key part of why you see some shops/restaurants with the "no AMEX" signs on their terminals -- don't be fooled by the "AMEX is too expensive to accept" red-herring, the actual difference for AMEX vs Visa/MC is ~1%[1], really not enough to matter for most businesses.
[1] Average brick-and-mortar interchange fees for Visa and MC range 1.85% to 2.6%, AMEX is 2.5% to 3.3%.
Anecdotal, but every small business owner I've talked to have said it's because of the 1% difference in fees, even with OptBlue.
I've only had 1 business owner ever say it was due to chargebacks, a small tea shop in a Chinatown in Canada. They also don't take Mastercard for the same reason.
This is also why American Express launched the Cobalt card in Canada, which had a 5x multiplier for eats, drinks and groceries, and pushed it so hard for years on social media and bus shelters, despite eventually starting to disincentivize it (it was a loss leader/upgrade feeder product for Amex). They wanted to win merchants back with a new generation of hip, social media savvy Amex customers.
AmEx also does not pay the merchant as quick as Visa and MC. And 1% is a significant cut for most retail businesses, as they have low single digit profit margins.
Are you sure? I am not referring to Apple’s App Store, I am only referring to the Apple Pay payment mechanism, which presumably is a relationship between the payment processor and Apple.
The bank would still be the one dealing with chargeback and chargeback related costs, I do not see why Apple would care or get involved.
However, I wonder if the biometric verification of Apple Pay merits a different response to chargebacks where the bank will not simply take the buyer’s side.
Sorry, I probably misunderstood and confused things. I was of course talking about the Apple App Store, when users file complaints about the app itself.
Does stripe not block users that have done charge backs?
No, as far as I know. But as a merchant, in theory you can block that customer from making future payments. But probably only their specific card or email.
Please make sure to set up Radar rules in your Stripe account.
Yeah, we have that
It's a symptom of a service problem.
TL;DR: We run multiple SaaS products on Stripe. Even with clear renewal reminders, invoices and easy cancellations, some users skip refunds and go straight to chargebacks.
A $10 payment ended up costing us $43.95 recently. Banks almost always side with the cardholder, and the only reliable “win” I’ve seen is when the customer withdraws the dispute themselves.
So here’s my question to the community:
What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?
What actually prevents someone from using a SaaS product, filing chargebacks every time they cancel, and essentially getting refunded for the last several months of usage?
Would love to hear your thoughts.
I assume if you are running multiple SaaS you already discovered this - but the expectation is that you will amortize the cost of a chargeback into your price if you are a legit business.
Card-not-present (I.E. internet transaction) has a lot more merchant fraud then friendly fraud (what we call these cases) and the incentives for both merchants and banks is to make sure the customer never loses trust in the system. If people were afraid to use their cards on the internet everyone loses.
It doesn't make sense for both the merchants and the banks to arbitrate every 10$ transaction. I doubt your case even reached a human, or if it did they even gave it a minute of thought - you are just someone who does not know the rules to them.
Now if a customer abuses the chargeback mechanism, he'll have is card revoked, probably be blacklisted and his life would be an insane amount of complicated from now on. But you'll never see these cases. Be sure that if someone could abuse the chargeback mechanism to the extent you mentioned, the system would be unusable, the fact you get chargebacks only rarely is a testemant that there is policing going on at the bank side.
It's just not 100%. Like Patio11 says - the optimal amount of fraud is non-zero[1]
If you have a large chargeback (let's say 1000$ and more) you might actually get someone to review it, and there's a slight chance you'll win if the case is good. But the system is not geared for that.
It's geared towards you amortizing the cost of chargeback into your price - and eventually the people who pay it is always the customer, not the merchant.
[1] - https://www.bitsaboutmoney.com/archive/optimal-amount-of-fra...
Thanks for sharing. Appreciate.
> What’s really going on here? Why do banks completely ignore the terms customers agreed to when they subscribed, or even in cases where the claims are obviously false? And why aren’t customers required to provide any proof at all?
they have a banking relationship with their client, and none whatsoever with you
if they decline the chargeback they then take on a load of risk (they might lose their client, they might get reported to the regulator, they might be sued by their client and then stuck with the bill)
but if they just pass it on then you take all the pain
not surprising at all given the structure of how credit card payments work
Just consider it cost of doing business and move on. You can also offer discounts for alternative payment methods but something tells me cards will be more attractive.
Yes, that’s pretty much how I look at it. And in all of our products I do everything possible to keep chargebacks to an absolute minimum, sometimes even making decisions that aren’t the most profitable from a business perspective.
When I look at some other companies, I often see all kinds of "shady" tricks that clearly boost revenue, but also inevitably increase the number of cases like this.
The credit card business of banks wants customers to spend money so they earn transaction fees. Everything the bank does is in service of this goal. Making it harder to do chargebacks would measurably reduce the transaction fees they earn in aggregate.
Your SaaS is a dime a dozen to them. They dont care about you. You dont make them any money, especially when the customer is actively trying to stop doing business with you.
My niche SaaS (monthly subs, no annual) gets about 1 or 2 chargebacks a year.
I give instant refunds, we are very lenient with our terms, and I've made the unsubscribe flow 2 clicks from email or dashboard (want to cancel? click. Are you sure? click. Done. Confirmation email). Every subscription email also includes short instructions on cancellation.
Even with a very customer friendly posture, the chargebacks fall into three categories:
- bad experiences with other companies, so instant chargeback instead of emailing or calling - miscommunication between customer departments (accounting doesn't know about the subscription and chargeback) - fraud or lying about usage
We've won about 50% of the chargebacks disputes. I recently added an admin interface that has a chargeback defense function that compiles evidence into a handy package I can upload to Stripe to dispute.
Seems like banks and payment networks are incentivized to make it simple to collect all those chargeback fees.
The bank most likely does not ignore them as such, it’s more that they are superseded by the credit card merchant agreement.
This could also be from fraud. Card testing for example, where they aim to figure out missing card details. Or some other nefarious use of stolen card details.
Yes, we’ve had a few cases where people tried card testing through us. But we noticed quickly and introduced the proper limits. In general, if you redirect the user to Stripe Checkout after clicking Subscribe button, all of that should be handled by Stripe itself and not affect your account. I guess ))
But this is a slightly different story. With chargebacks, almost every time it was just a customer not wanting to admit fault. What’s strange is that they could have simply written to us and asked for a refund. But I guess they realized they were in the wrong, so instead of contacting us, they went straight to their bank.
Yep so strange given it is never easy to get a charge back. Doing one now and it is like pulling teeth. I would heavily chase up a traditional refund before doing a charge back. I suspect some banks are making it too easy.
To be honest, I’ve never personally filed a chargeback, so I don’t really know how difficult the process actually is ))
Yes for me it is last resort. Email chains go nowhere. Mentioned consumer protection laws but nothing. It's the next step before small claims court. Not having a fun day if doing a chargeback. It's very rare.
I’ve always considered the chargeback the last resort “burning the bridge” action. Problem is that merchants lately are getting way worse about customer support.
I’ve been a credit card user for 30 years, and in the first 25 of those years, I only had to resort to chargeback once. In the most recent 5 years, I’ve had to do it about 3 times. Companies in general are just way less responsive now and take their customers for granted way more than in the past.
It boggles my mind that this is a surprise. Let's start with this:
> What’s really going on here?
Reality. You need to prove something: that the card holder made the purchase to the standard the banks set and you can't. It's as simple as that.
> Why do banks completely ignore the terms customers agreed to when they subscribed or in cases where they’re clearly making false claims?
Because your agreement with the customer is not the only agreement in play. You accepted these chargebacks and that process when you accepted credit cards.
> And why aren’t customers required to provide any proof at all?
You can't prove a negative. I can't prove I didn't authorize payment. And, because it's online, you can't prove I did. "logs, screens, terms, full context" are not proof. None of that is useful or proof in any way that the card holder made the purchase.
> What actually prevents someone from using a SaaS product, filing chargebacks every time they cancel their subscription, and essentially getting refunded for the last several months of usage?
Credit card number limitations. Why would you accept a payment from the same credit card number again? Also, repeat offenders can be blocked by payment providers. This is the way a lot of online stores work.
> Would love to hear your thoughts.
A few more points...
> "The Madness of SaaS Chargebacks"
It's not SaaS chargebacks. It's just chargebacks.
> The worst part is that it doesn’t matter whether you win or lose a dispute — the very fact that it was filed still counts against your account.
Yes. The reason it counts is because you are problematic, or at least attract problematic customers. This ends up costing the banks money. I'm sorry, but if you had a problematic customer that cost more money than you made from them, you'd probably stop working with them, too.
> Still, we always submit evidence.
Not the evidence that matters. You need evidence that the card holder authorized the payment. I promise you, nothing you submitted proves that.
> Inside the product, we also provide a simple, self-service way to cancel the subscription without any questions asked.
Do you ask for the username and password? Right... and if I didn't sign up for the service to begin with, I didn't agree to the TOS.
Let's also address one more thing:
Facts:
> Charge was processed August 12 (regular billing cycle). > Subscription canceled August 18 (6 days later). > Dispute created August 19. > The claim is false.
Nope. The problem is when the person requested the subscription be cancelled. Not when your system recognized it.
> the customer doesn’t have to prove anything
The problem is when a customer requests you cancel their subscription, and you say you will, and you don't do it until 6 days later.=
The problem is when a customer goes to request to have their subscription cancelled, and your service is broken and doesn't recognize the cancellation and they don't realize it never cancelled until 6 days later.
I can keep going.
Let's try this: prove to me the customer didn't submit a request to cancel the subscription when they said they did.
That's right, you can't prove a negative.
I can keep going on, but you can find lots of information on this and why it is the way it is. If you don't want to deal with this, there are other options that eliminate or reduce the chance of chargebacks. But you won't find those as popular. Because they aren't customer friendly.
I got an Ad for a company that aims to reduce your chargebacks, I wont say who it was. Who knows if it works.
There's quite a few promising less cancellations, less churn but I haven't seen less chargebacks yet. Usually they tell you to give customers offers during cancellation, e.g. a discount, months free, anything so they don't click the final "cancel now" button.
They're mostly just typical UI/UX or business consultancies trying to fit their way in the niche by offering vague advice and "data-driven analytics" services. I don't have a great deal of confidence that the average business analyst couldn't do better, but some companies don't trust their staff and need to pay someone to tell them otherwise.