MBA1212 How To Avoid Chargebacks + Free Ride Friday!

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Hey, today is Free Ride Friday, so make sure you hang on to the end of the episode to hear one this week's Free Ride. Every Friday we give away a lifetime membership to one of our programs. This month we're giving away ezcourse, our 30 day course on how to build your own online course in 30 days. It retails at $500 over at ezcourse Co, but somebody's gonna win it for free today on Freeride Friday. So if you want to win, just leave us an itunes rating and review and you enter our weekly random draw. Listen in on Friday to see if you won. It's our way to say thanks for leaving us love on itunes. Let's jump into today's episode. Heyo. Welcome to the $100 MBA show, the business podcast that gives you what you need to help you get what you want every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the $100 MBA, a complete business training and community online. And in today's episode you will learn how to avoid chargebacks. Chargebacks have become a huge topic in the world of the Internet these days. If you do a search on Twitter for the word chargeback, you'll see tons of conversations of people trying to avoid them as much as possible. Why? And what is all this chargeback talk about? Well, a chargeback is when a customer calls your credit card company and says, hey, I don't approve this charge. I want my money back. At that point, the credit card Company returns the money to the customer and then reports this to the credit card payment processor. The people that process your payments, whether it's PayPal or Stripe or whatever. At this point, you're notified with a chargeback, saying, hey, somebody says this is fraud or that they don't approve this actual charge or they don't recognize this charge. This is bad for business. Why? Because it's like a hole in a bucket. It's leaking out revenue. You think you have a sale, but on the back end, a chargeback happens and you lose that money. Plus there is a fee that your payment processor will charge you for the chargeback. Usually it's around $15 to $25. On top of that, too many chargebacks and your payment processor may suspend your account. So you could see why people want to avoid chargebacks as much as possible. And that's what we'll be talking about today, how to do that, as well as the fact that to be aware of the controversy that's happening right now with chargebacks and banks. So you can err on the side of caution. We'll also talk about what to do after. You've done everything to avoid a chargeback, but you still get one, how to handle it, a lot to cover. So let's get into it. Let's get down to business. Let me start by saying that chargebacks are just not fun. They're not a business owner's friend. It's for several reasons, but mainly because there are some people that do abuse the chargeback system. Let me paint you a scenario so you know what I'm talking about. Somebody buys a product of yours, let's say it's an online course and you have a 30 day money back guarantee. They buy the course, but they don't even use it. They don't even try it. And your 30 days has passed. It's say it's two months down the line. They may email your customer support, say, hey, I'd like to return this course. And of course your support's gonna say, well, we have a 30 day money back guarantee. It's been 60 days since you bought it, so unfortunately we're not able to return it. When they get their response, the customer just calls up their credit card company and says, hey, I don't recognize this charge, or I don't approve this charge, or I don't want to pay for this or whatever they word it. And the credit card company automatically will take the side of the actual cardholder because that's the customer they're serving. They want to make sure they're happy, so they'll give them credit for that amount of money. Let's say it's $500. At that point, like I mentioned before, you will be notified by your credit card processor that. That you've been charged with a chargeback instantly. As soon as you have a chargeback, your credit card processor will charge you that amount of money plus a fee. There's no negotiation. There's no talking. There's no, like, let us know what happened. The first thing they do is take that money from your account plus the fee of $1525 for the chargeback. It's like a processing fee. It's like a penalty. At that point, your credit card processor will then ask you, hey, do you want to fight this? Do you want to dispute this? Do you want to submit some evidence? Go ahead. But in the meantime, the money is already taken away from you. You could submit evidence like, hey, this is the receipt. This is my policy. This is, you know, when they logged in, they have access to the course. You can submit everything to the credit card processor, which they would submit to the bank. And the bank has 90 days to get back to you. So you could be out of pocket for up to 90 days. At that point, it's up to the bank, the credit card company, they could say, hey, clearly our customer is in the wrong here. And they, this is not a valid chargeback. Or they can say, nope, we don't approve this evidence, and we are gonna go through the chargeback and you won't get your money back. If you do win the case, you do in the dispute, you will get your money back that they took away from you at the beginning of the chargeback along with the fee. But here's the kicker. A lot of buzz, a lot of discussion about how many chargebacks you actually win on Twitter. One big discussion that I saw on Twitter recently was with Peter Levels, who's the founder of Nomad List. And people chimed in and said, hey, this is how often I win chargebacks. And basically, statistically, it sounds like 9 out of 10 times, you will lose the chargeback. The credit card company will side with the credit card holder. Even if you're totally in the right, even if your policy is on the up and up, even if you've done everything correct by the customer, it's sort of just tough luck and it stinks. It's really horrible. I know. But the reality is, is that you don't win many chargebacks. And this brings me to today's Topic how to avoid chargebacks altogether. Because having too many chargeback on your actual account is not good. They say anything more than 1% of your total revenue is not good because they can suspend your account and see that, hey, maybe you're doing some fraudulent kind of activity or you're doing some sort of shady business. And it's not good to have chargebacks. Plus, it's a headache and it's a waste of time. And even if you gather all the evidence and all that stuff, your chances of winning the chargeback is really, really low. They're really low. It's very slim. So what we want to do is avoid them altogether. So what do we do? Well, there's an easy way to do this and there's a little bit more of a complicated way. I recommend the easy way because it's going to save you time and headaches. And the easy way is this. You have a return policy, you have a money back guarantee, you have a trial, you have all that stuff. If a customer emails you and asks you for a refund, I would negotiate with them. I would try to make the customer happy without the chargeback or without them, you know, resorting to doing a chargeback. Say for example, somebody signed up for something that was for a year and they want a refund after six months. Instead of giving them a full refund, say, hey, I can give you 50% of the refund because half of the time has passed. And by doing that, you're going to avoid a chargeback and you're going to make money. You're actually going to save money, half the money that you would normally have to pay back, plus the chargeback fee. You can negotiate with them and say, hey, give them credit, give them extra months, give them extra products, give them extra services, see if you can come to terms with the customer, see if you can make them happy in some way. A lot of times you can bring them around and avoid the chargeback altogether. Once they leave unhappy and they're disgruntled, they will charge back. Most customers will. This is my experience. So you want to make sure that you can try to, you know, please them in some way. If all your negotiations fail, if all your attempts don't work out, personally, we recommend to give the refund. Why? Because they will threaten you with a chargeback and chances are you will lose a chargeback. Totally unfair. I'm on you on your side here, totally unfair. But it's going to happen and you're going to pay more than if you just refunded them. Plus it's a blemish on your account and you know, the whole chargeback limit. Another way to avoid chargebacks is to inform the customers when they're about to be charged so there are no surprises. So they can cancel and not contact you and ask for a refund or charge back without even contacting you. So even if you have a free trial for a week or 14 days, or if you have renewals that happen year after year, give them a heads up. A day or two. If it's a renewal for a year, give them a week's heads up. Hey, you're about to renew in one week. Just letting you know, resell them on your product, remotivate them and show them the value they have and thank them for being a great customer. But it's a heads up as well to let them know that you're about to charge them, so there's no surprises. Sometimes people do a chargeback because they don't recognize the charge on their card and then they can clear it up through the chargeback process. But you want to avoid all that altogether by letting them know, hey, we're about to charge a card in a month. This is what it's going to look like on your card. And thank you so much for being a customer. Here's all the value you've gained in the last year with us. This is what we're doing this year. Please enjoy our product and continue to get a return on investment. Even with the reminders before the end of trial on renewals, you will get people who forget they're on trial that forget they signed up for something. They forget that they're being, you know, auto renewed after a year. And they will email your support. They will email you and say, hey, I forgot, I don't want to renew. I do not want to be off, you know, off trial and be charged. I'd like a refund at that point. In my experience, you should give a refund. Why? Because you want to leave them happy and they want them to come back when they're ready to continue to use your product or service. And three, those are the prime examples of people that do chargebacks. Hey, I didn't mean to buy this. Hey, I didn't want to get charged. Hey, I can't afford this. I know all these excuses are not excuses in the world of business, but it's the reality and you're gonna have a chargeback on your hands if you don't understand that and work with that. So give the refund because Chances are that will turn to a chargeback. In this process. You're creating a great experience for your customers. Customers are leaving you happy, even if they're not continuing to be customers. They're gonna spread word of mouth of how well you treated them and how you were fair. And they'll remember that when they want to come back to a service like yours.

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Guys, to wrap up today's lesson, I would say a few years ago if you asked me on this product, I was super hardlined. I was like, no, we have a policy. We're going to stick to the policy. We are more than fair with our customers. We give them a trial, we give them a money back guarantee. We do all right by our customers. But if they abuse it, too bad, I'll fight every charge back to the death. No, don't be like former, okay, don't be like that person. Because, hey, you're gonna pull out your hair in frustration. You're going to deal with so many problems and it's gonna damage your actual, you know, account with your processor. Whether it's stripe or Braintree or whatever you're using for no reason, it's gonna have your customer leave you disgruntled and upset and a bad taste in their mouth. You're gonna lose, lose, lose, lose. In all accounts, you're gonna lose on every direction. So there's no reason to be so hard headed. You're gonna have to kind of just be like, that's just the reality of doing business. And I'm gonna have to bite the bullet and give those refunds to avoid the chargebacks. For the most part, most of your customers will be delightful, be responsible, be happy to renew, be happy to be off trial. Won't have any issues whatsoever, but there will be a percentage that will abuse the system and you're gonna have to Just accommodate that and plan accordingly. Alright? Thank you so much for listening. Today's episode's not over though. It's Free Ride Friday. I gotta give away a lifetime membership to Ezcourse. Let's see who won this week's Free ride. And it's John from Ottawa, Canada. John says good show. Five stars. Thanks Omar, for your great insights in business. Keep them coming. I attended a few of your webinars too. Cheers from Canada. Well, thanks John for being a listener to the show and attending my webinars. Awesome to hear from you. You are a Free Ride Friday winner. Just email me@omar mba net so I can hook you up with the free ride to ezcourse, our $500 course on how to build your own online course in 30 days. A great step by step course. If you're like John and want to check out one of our free webinars, our free workshops and demos, you can head on over to webinar ninja.com workshop and you can sign up for our next upcoming live webinar. That's it for me today guys. But before I go, I want to leave you with this. There will be a small minority of people that will abuse your system. There's just people out there that just, you know, don't have the same moral compass as you. Don't have the same standards of what's right and wrong as you. Don't let it ruin your image or your impression of your customers. No matter what business or niche you're in, you're gonna have a group of people that are just not doing right by you. That's totally okay. That's just part of business. You have to take the sweet with the sour. It's totally fine. Just gotta plan accordingly and have a plan of action to how to react to it properly. And that's why we did today's lesson. Alright, I'll check you in Monday's episode. I'll see you then. Take.

At Capella University Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.