How to Respond to a Chargeback or Dispute

This post covers some methods to deal with chargebacks – when a member disputes their charge for membership.

In some cases, a chargeback is actually fraud, whether it is a stolen credit card or PayPal account login. What I’d like to talk about now is a misuse of chargebacks: when a member is grumpy or lying about payment fraud just to get their money back.

What are chargebacks and disputes?

A chargeback or payment dispute is when a customer denies the payment.

Even if you offer a refund policy, there will be some number of customers that decide to simply call their bank and initiate a dispute. This could be because of (actual) fraud, dissatisfaction with their purchase, or they are just a despicable person who got their goods and don’t want to pay for it.

Your merchant account or payment gateway will let you know that someone is disputing a payment. You will then have a window of time to respond to the dispute and “make your case” for why the chargeback is not valid. If the chargeback is not ruled in your favor, the value of the disputed transaction as well as a merchant or gateway-imposed “fee” will be deducted from your account. See Chargeback Fees by Gateway »

First, locate the user’s membership account and disputed order.

My first step when dealing with a chargeback is to locate the user’s membership information and get some background.

  1. Go to Memberships > Orders in the WordPress admin.
  2. Search for the disputed order using the gateway’s “transaction ID”, or the “Invoice ID” on the order.
  3. If you don’t have a transaction ID, you can try searching for the user by Name or Email Address (the data you get about a dispute varies by gateway).
  4. Open the user’s profile in a new tab.
  5. Open the disputed order in the current tab.

Now, be an investigator.

In most cases, a membership site is a “virtual product”. This makes disputing a chargeback a bit more difficult—how do you prove you delivered what they have purchased?

  • Search your email program to see if the user had communicated anything with you directly, either prior to purchase or after.
  • If your membership site has any engagement methods, such as a forum or comment forms, see if the user has participated in these things.
  • Do you have an email newsletter? If so, access the user’s record in the email marketing tool you use to see if they have opened your messages.

    That’s a pretty high engagement rate for someone who “hasn’t received” my product.
  • You can also use the Visits, Views and Logins Report under Memberships > Reports to present activity for the individual user. Have they been logged in and using your site?
  • Better yet, if you are using the Better Login, View, Visits Report, you will have even more data about the user’s activity on your site.

    Wow, sure looks like you have been using your membership?!

Was it actual fraud?

If your investigating makes you 99% sure it was a stolen payment method used for purchase, just accept the dispute. It stinks. You’ll pay a fee. But it was actually fraud, and you don’t really have any recourse for this case.

You can prevent some fraudulent charges using the methods outlined in this post.

It isn’t fraud – I want to fight this dispute!

If your investigating leads you to believe this person just wants their money back, you should respond to the dispute and make a case for why it isn’t a fraudulent purchase.

Before I begin the process of fighting a dispute, I always email the member directly. I’ll ask them to withdraw the dispute and communicate that I will refund their money [how-to].

This never works. Most often I get no reply. But occasionally, I’ll get a weird reply like “I just didn’t have enough money so I said this was fraud.” Luckily, you can use this in fighting your dispute, so even if they don’t withdraw their dispute, you’ve gotten some more ammunition to win your case.

Responding to a Dispute

The method to respond to a dispute varies by gateway, but in general you will be asked to write a statement and provide supporting documents about the purchase. In the case of a physical good, they will ask for proof of shipment (and you may even have proof of delivery depending on the shipment method).

For all other purchases (digital goods, downloads, access, subscriptions, etc.), proving that the charge was not fraudulent is a little more involved.

First, write a statement that clearly describes the situation:

This user purchased a membership that includes access to a private forum. The user participated in several discussions as well as personal email communication with me. Please refer to the included documents with proof of these interactions.

Additionally, I am including files that show all details this user entered when creating their membership. Their name and email address as communicated to me matches that on the dispute and the payment method used.

Then, take screenshots and create PDFs of EVERYTHING

The supporting documents I generally include are:

  • A PDF “print” of the user record in the WordPress dashboard.
  • A copy of the membership confirmation email I receive as admin when they made purchase.
  • Copies of any direct communication they made with me.
  • Copies of any proof of participation on my site (comments, forum replies, contact form submissions, etc.)
  • A copy of the email marketing service’s details about their email opens.
  • A copy of your refund policy, if offered, that would show they had another method to get their money back.

Now you wait.

After submitting your evidence, the payment gateway or merchant will communicate with the user’s bank to make your case. This can take anywhere from a week to two months.

I hope the dispute is sided in your favor!

In most cases, the seller will lose the dispute.

The person filing the dispute has far more protections in place than you. And in most cases they are being defended by a credit card company fully motivated to make them happy. Even when your payment gateway does their part in presenting your evidence, more often then not the seller will lose the dispute, pay the fee, and have the funds returned to the buyer.

There is some comfort in knowing that you did your best to provide honest information about the charge and to defend yourself from this type of abuse. I’m sorry you didn’t win.

What’s next?

When you lose a dispute, make sure you remove the membership level for the user. And if you are feeling particularly upset about it, you can use one of these methods to block users from logging in, selecting or changing membership.

You can even write them a really nasty email. Just don’t send it. Just go read Jason’s post on dealing with hate.

New Report to Instantly View Your Refund Rate for Month/Year/All Time

Add a custom report to the Memberships > Reports dashboard that displays your membership site’s refund rate.


See this blog post on custom reports to learn how to add the custom code to your site.

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About Refunds and Our 100% Money-Back Guarantee

We offer a 100% Money-Back Guarantee on all paid plans on the site. This encourages conversions by building trust and setting customers at ease. They know that if our software or support doesn’t work out for them, they can at least get a refund for the cost of membership.

Further, because we process refunds quickly and with understanding, a lot of our ex-customers leave with goodwill toward us, instead of resentment.

On the downside…

We do lose a bit of money every time we give someone a refund. As long as the percentage of customers getting refunds remains low, the increased conversions and other benefits outweigh the cost.

If your business model allows for refunds, it might be a good idea to offer a 100% no questions asked money-back guarantee just like we do.

Here’s the language we use on our pricing page for our money-back guarantee:

If within 30 days of purchase, you decide not to use our software and services, you may request a full refund. To obtain a refund, you will have to contact us, including the username, email address, and name on file for the account you wish to cancel. At that time, we will cancel your membership and refund any one-time payment made.

In reality, we’ll refund the money well after 30 days as long as it’s technically feasible (depends on the gateway). We ask for them to contact us with certain info to make sure we can find their membership to refund, but we don’t ask them any questions.

Process Refunds as Quickly as Possible and Move on with Business

We process refunds as soon as we get to them in our inbox.

Occasionally (like 1 out of 30 refunds), if we’ve been working with someone for a long time, and I suspect they’d rather have a few minutes of closer support vs. an actual refund, I’ll offer that first. But in general, our only reply to a refund request is to process the refund immediately and write back to them:

Your refund has been processed.

That’s it.

Post-Refund Action

Many people might suggest doing follow ups with customers who ask for refunds to learn what you might be able to change to keep them around, but I’m a proponent of spending your time and focus on customers willing to pay for your product vs the non-customers who aren’t willing to pay.

There may be insights to be gleaned from ex-customers, but I consider any feedback from someone who requested a refund suspect. Even if you say “you can request a refund for any reason”, it’s human nature for people to defend their decision by perhaps lying and saying “it isn’t working for me” instead of “I just want my money back”.

Rarely (again maybe 1 out of 30 refunds), a refund request will say something like “your product didn’t fit our use case“, and I will reply with “Your refund has been processed. If you have a moment, could you tell us what your use case is so we could consider it in the future?” I’m not looking to open up a larger conversation or spend too much time (or any extra time) on things. I’m just looking for a quick response like, “I need it to work with X” that we could chalk up as another vote for us to work on integration with X.

People Will Steal From You. Get Over It.

Similarly many will worry about users signing up, downloading premium content, and then requesting a refund… effectively stealing your content.

I think the record on our site for time from checkout to refund request is under five minutes. Many refunds come in almost exactly 30 days after checkout, probably because they set a reminder to ask for the refund.

The truth is if a refund wasn’t available, people inclined to steal your content would find some other way to steal your content. They would search on BitTorrent or unofficial sites. They would start a chargeback with their credit card company or try blackmailing you for a refund by email even if you don’t have a refund policy.

Again, focusing your time and effort on the customers who want to pay you will almost always be a better use of your time than battling against non-customers who don’t want to pay you. We sometimes end up spending time and money on customers who we’ll end up refunding, but we also avoid some chargebacks (which are more damaging) and blackmail attempts… saving us time and a little bit of our souls.

“Your refund has been processed.” Then move on with business.

Refund Rate Targets

We target a 10% refund rate. I forget where I came up with this number. I read it somewhere or heard it on a podcast, but I can’t find the source now. (If someone else knows of a source talking about this, let me know in the comments and I’ll share it here.)

In any case, 10% seems like a kind of natural rate of refunds. At 10% of sales, about half of all refunds will be of the “they were going to try to get their money back no matter what” variety. The other half will be of the “the product wasn’t actually going to work for them” variety. Of course, I’m hesitant to admit it, but a percentage of those refunds are also from customers that we just messed up with: we didn’t support them well, or left them hanging in some way. It happens.

If refunds are more than 10% of sales, that means there is a disconnect with our marketing and the product we are actually delivering. The product really isn’t working for a large percentage of people buying… or people just aren’t feeling like the value they are receiving is worth the price we’re charging. We might need to lower our price, but more likely we just need to make sure we aren’t over promising on our sales pages and in our marketing. For those of you struggling with high refund rates, I wrote up some tips to lower your refund rates here.

If refunds are less than 10% of sales, that means we’re not charging enough. We might be incredible at relating value to our customers, but we’re also probably just charging so little that many folks aren’t motivated to even ask for a refund. A low refund rate is a good indicator that you are under charging.

To get a sense of some real numbers, so far in 2016 we’ve had 834 sales and 84 refunds. Very close to our 10% target.


If I had to summarize the advice in this article, I’d lay it out like this.

  1. If possible, offer a no questions asked, 100% money-back guarantee.
  2. Allow refunds as long as technically possible. Typical periods are 30, 60, and 90 days.
  3. Process refunds as quickly as possible.
  4. Simply reply “Your refund has been processed.” and move on with business.
  5. If refunds are more than 10% of sales, consider lowering your prices, increasing your product’s value, or otherwise updating the expectations of your marketing to match the value of your products.
  6. If refunds are less than 10% of sales, consider raising your prices.

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