Chargeback logic

He kept silent on the role of customer service in reducing chargebacks for rebills?

He's not your friend.

I've been looking into this as well since I want to start a few rebills.

The only thing I can determine is that they are obviously using offshore merchant accounts. These accounts allow for an unusually high chargeback amount, and just hold some of your funds in reserve to off-set it.

The other thing is the timing of charges. On Day 0 the customer pays $5 for the shipping of the free trial for one months supply. On Day 14 they get charged $80 for that one month's supply. On Day 30 they get charged another $80 for the next month's supply.

The way I look at it, you could get in $5 + $80 + $80 = $165 worth of charges in before the customer even reviews their statement.

This assumes they check their statement right away. Most people don't look at the bill until a few days before it is due, which is often 15-20 days later.

You might even be able to get in another month's charges in at that point.

productionhead said:

He kept silent on the role of customer service in reducing chargebacks for rebills?

He's not your friend.

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Yea, my thoughts exactly.

If they phone into one of your reps, it makes more sense to just offer a full refund back onto their card.

But if they phone their CC company directly they are screwed.

With rebills I guess it is imperative your toll free number gets displayed with the merchant name on their CC bill.

Paper_Chase said:

I've been looking into this as well since I want to start a few rebills.

The only thing I can determine is that they are obviously using offshore merchant accounts. These accounts allow for an unusually high chargeback amount, and just hold some of your funds in reserve to off-set it.

The other thing is the timing of charges. On Day 0 the customer pays $5 for the shipping of the free trial for one months supply. On Day 14 they get charged $80 for that one month's supply. On Day 30 they get charged another $80 for the next month's supply.

The way I look at it, you could get in $5 + $80 + $80 = $165 worth of charges in before the customer even reviews their statement.

This assumes they check their statement right away. Most people don't look at the bill until a few days before it is due, which is often 15-20 days later.

You might even be able to get in another month's charges in at that point.

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CCarter said:

Nutra rebills, if they are stupid enough to fall for a $5 initial offer on some online diet stuff... well, you can figure it out from there.​

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I don't think these people are stupid. I think they are just trusting.

If all of these rebills put "We will charge you $80 a month in big bold letters and oh, our product doesn't work lol", no one would buy.

So in the end, the side operating on dishonesty and malice outweighs the side with stupidity on it.

And as time goes by, this is bad for consumer confidence in the Internet... but ya'll need to put Rolls Royce kits on ya'll Nissans right?

Are you load balancing your MIDs?

Kaedus said:

Are you load balancing your MIDs?

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"Load balancing" MIDs does nothing to reduce chargebacks on a percentage basis

o hai guyz said:

True, but couldn't they just chargeback everything once they finally notice it? I asked Visa/Amex from a customer's point of view how long I have to dispute charges, and they said it can be done up to 6 months from the purchase date. So even if you've charged them $5 + $80 + $80, why wouldn't they just dispute everything?

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Yes, it is definitely possible.

That's why I think it is best that they phone you first, instead of their CC company.

I've seen merchants include their toll-free number on the CC statement. Most people will phone that number first before phoning their CC company. If your reps are good they can either explain to them that everything that was charged, they agreed too, if it escalates, just offer them a refund.

Even the credit card representatives will ask you if you tried to deal with the merchant first. [ on the customer side of the chargeback initiation process ]

productionhead said:

Even the credit card representatives will ask you if you tried to deal with the merchant first. [ on the customer side of the chargeback initiation process ]

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I can attest to that.
And your bank has to provide a reason code to represent it, and as far as I can see there isn't a reason code it would fall under precisely.


Reason Code 30 Services Not Provided or Merchandise Not Received................................. 855
Reason Code 41 Cancelled Recurring Transaction................................................................ 859
Reason Code 53 Not as Described or Defective Merchandise............................................... 862
Reason Code 57 Fraudulent Multiple Transactions................................................................ 871
Reason Code 60 Illegible Fulfillment....................................................................................... 874
Reason Code 62 Counterfeit Transaction............................................................................... 877
Reason Code 70 Card Recovery Bulletin or Exception File.................................................... 883
Reason Code 71 Declined Authorization................................................................................ 886
Reason Code 72 No Authorization.......................................................................................... 891
Reason Code 73 Expired Card............................................................................................... 899
Reason Code 74 Late Presentment........................................................................................ 902
Reason Code 75 Transaction Not Recognized....................................................................... 906
Reason Code 76 Incorrect Currency or Transaction Code or Domestic Transaction
Processing Violation................................................................................................................. 914
Reason Code 77 Non-Matching Account Number.................................................................. 920
Reason Code 78 Service Code Violation................................................................................ 922
Reason Code 80 Incorrect Transaction Amount or Account Number..................................... 924
Reason Code 81 Fraud – Card-Present Environment............................................................ 929
Reason Code 82 Duplicate Processing................................................................................... 939
Reason Code 83 Fraud—Card-Absent Environment.............................................................. 942
Reason Code 85 Credit Not Processed.................................................................................. 954
Reason Code 86 Paid by Other Means.................................................................................. 960
Reason Code 90 Non-Receipt of Cash or Load Transaction Value at ATM or Load Device... 963
Reason Code 93 Merchant Fraud Performance Program....................................................... 965



It can probably fall under:
Reason Code 41 Cancelled Recurring Transaction
Reason Code 57 Fraudulent Multiple Transactions
Reason Code 62 Counterfeit Transaction
Reason Code 72 No Authorization
Reason Code 75 Transaction Not Recognized

But from my understanding it doesn't comfortably fit under any single category considering their Descriptions

And the amount of work it involves...it wouldn't really be worth the $160.

Plus, banks are a bitch. So far, in over 20 bank employees I've talked to, including 8 customer support supervisors and two branch Credit Card Department heads, just one person knew about the chargeback procedure and could send me the form. There's a general lack of knowledge, even amongst bank employees, about chargebacks.

Leemoor said:

And the amount of work it involves...it wouldn't really be worth the $160.

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Amount of work for who? The bank employees formulate the decision to process the chargeback or not mostly on the testimony of their customer. They do look into tangential signals such as the merchant's customer service and the billing policy that is apparent on the merchant's website, and also if the merchant being disputed against is a story they are familiar with (I'm sure every bank employee in the nation has heard about a $5 diet pill turning into $160 charges by now)... then they process the chargeback under whatever reason code makes sense.

productionhead said:

Amount of work for who? The bank employees formulate the decision to process the chargeback or not mostly on the testimony of their customer. They do look into tangential signals such as the merchant's customer service and the billing policy that is apparent on the merchant's website, and also if the merchant being disputed against is a story they are familiar with (I'm sure every bank employee in the nation has heard about a $5 diet pill turning into $160 charges by now)... then they process the chargeback under whatever reason code makes sense.

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The person filing the chargeback, atleast I had to in my case. The first hurdle was actually getting the chargeback form which alone took three weeks.

After that I needed to prepare the documents to send with it since it involved multiple transactions, was past the 120 day limit and I had to file it under "Goods/Services were to be expected after transaction day" "criteria", and thus had to send in the supporting docs.

I received a representment(response from the other bank) on the 44th day, sent in my response on the 45th, and the bank didn't file it in for another 3 days -.-

You might have a different experience than mine though.

Use a 1-800 number. Put a quick 30 second recording on it saying "If you have any questions, comments, concerns, or would like to talk to one of our customer service representatives please send a quick email to customerservice@ohaiguyz.com and we'll respond back to you right away."

Answer those emails promptly. Make sure your website name is the name that is showing up on their cc bill.

Also, why are your competitors not having the same problem?

There's a reason why I run a 15% refund rate and a 1% chargeback rate on my nutra campaigns. Customer service is the most important piece of this game. Don't cheap out and use some bullshit offshore center either... I was able to leverage my large domestic call center for this-- others aren't so lucky.

For sure on the item name for CC-- mine is: SNKOIL INC 8001231234

You need to make every attempt to resolve this before it goes to THEIR bank for resolution. Have a corp site with a quick and easy to use cancellation system. Have a call center that provides ALL recordings to you, provides refund / complaint metrics / etc. Have your customer service # on EVERYTHING- from invoices to shipping notices to the return address on the envelope...

o hai guyz said:

I recently shut down a gaming site I've had for about 8 months due to an 11% chargeback rate that was getting too out of hand. Kids would take their parents' credit cards, buy a few things on the site, then the parents would check their statements and chargeback everything. For those of you on the merchant side you already know it doesn't matter if you win or lose, everything counts against you anyway.

So today I had lunch with a friend who pushes nutra rebills (as an advertiser, not affiliate). I asked him how he can bill someone $80 a month for 3-4 months without them knowing/caring. Obviously the majority of them think they're signing up for a $5 trial and not a $80x4 subscription, so how is it possible that they never check their statements and dispute the other payments? He didn't have an answer.

Can someone explain the logic behind chargeback %'s and what's going on here? Are most nutra customers just so stupid that they never look at their statements, or are they so rich that they don't care?

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First I will start by saying the primary reason you had a high chargeback rate was not from unsatisfied customers. It was from people who had no idea what the charge is. Most rebills, the customer knows what he or she was charged for. Most of the time they see the $1 or $5 and since it is the same descriptor they think its the same company and that they Did place an original order from that company. When calling the bank to dispute the second, third, or fourth charge the bank will point out that they were originally charged the small amount. Banks are well aware of subscription billing and believe it or not, are on the merchants side almost as many times as they are on the customers side.

You are correct it does not matter if you win or lose the chargeback. The chargedback amount and the chargeback fee are nothing compared to the risk of losing a merchant account over excessive chargebacks.

They do check their statements. They usually call or email the company first. Good customer service is the only way typical rebill merchants can stay in business. Bad customer service has you wiping out after 2-3 months (If you wipe out after 1-2 months then you are really doing something wrong).

Next I would like to separate banks/isos and card associations (visa/mc).

Card associations have strict chargeback limits. Visa is 1% ratio AND 100 chargebacks in any one month. MasterCard increased late last year to 1% AND 150 chargebacks in any one month. This goes by transaction Count, not volume. Any month your merchant account hits those limits you get flagged and you are put into a monitoring program. You do not want this to happen at all. These are the hard limits you should aim to always be below. Easiest way is to not have a domestic account doing more than 125k a month. INTL limits are a bit higher but intl accounts suck and are more risky. If you are doing everything right you can still run domestic fine.

Banks/isos are less lenient typically, they don't want you to approach those limits are are looking out for their interests. You have to understand if you hit those program thresholds, they could very well lose money as they are fined by the card associations and if your reserve does not cover it they have to eat those costs. They will want you below 1-1.5% at all times. However, if you know how to manage your accounts well and sound like you know the business you can run over that and sometimes if volume on an account drops and you run like 5-6%, you won't be in trouble either. It takes % AND count not OR count. You can have 10 chargebacks and a 5% cb ratio and your account is not really a risk, unless maybe that is month 1. ISOs/Banks know this model. (Well they should, sometimes I question some underwriters and risk department 'analysts') They know how many chargebacks should come in after 1 month, 2 months, and so on. Their main concern is chargebacks wiping out reserves and program penalties and fees from the cards. Build a good reserve up and you should be ok.

The answer to your last question, yes many of them do not check their statements. There are many people who just pay the minimum payment on a card month after month and never check. However, most of them do check and if they do not remember signing up for a trial or monthly subscription program they will contact your customer service center. A good rep answers the call professionally, gives empathy and walks the customer through the order process. Most customers when properly explained how the program works and are walked through the same process they took will calm down and ask to either return for a refund or cancel all together. A good rep can save this customer on a discount, and sells the product or service as being great and they should continue with it. A bad rep convinces the customer the company is a scam and they call the bank. You need good customer service or you wipe out every time. If you listen to a good rep vs a bad rep you will notice the difference right away. A good rep brings credibility to a business that a customer does not believe has any. A bad rep proves to the customer they are right and they were scammed. Customers are a lot harder to be won over when they are calling and upset. This is the difference between 5% chargeback and 1% chargeback. Seriously, it matters this much.

Paper_Chase said:

I've been looking into this as well since I want to start a few rebills.

The only thing I can determine is that they are obviously using offshore merchant accounts. These accounts allow for an unusually high chargeback amount, and just hold some of your funds in reserve to off-set it.

The other thing is the timing of charges. On Day 0 the customer pays $5 for the shipping of the free trial for one months supply. On Day 14 they get charged $80 for that one month's supply. On Day 30 they get charged another $80 for the next month's supply.

The way I look at it, you could get in $5 + $80 + $80 = $165 worth of charges in before the customer even reviews their statement.

This assumes they check their statement right away. Most people don't look at the bill until a few days before it is due, which is often 15-20 days later.

You might even be able to get in another month's charges in at that point.

Click to expand...

Not everyone is using offshore accounts. Offshore accounts typically payout in weekly arrears, have fees double or triple what a domestic account is, and you are at risk of not ever seeing that reserve at the end. Good domestics payout daily, at 1-2% rate and a 10% reserve at most. Trying to start a nutra rebill on intl accounts and have to compete with the domestic account guys (Assuming you are doing US/CAN)? Good luck. Domestic guys are already making pretty slim margins, some not profiting anything for 2-3 months. That is 2-3 months on sales purchased on day 1 mind you, not rolling day after day like it is in the real world. These guys are already floating hundreds of thousands or millions of dollars, for months, sometimes a 6-10 months at a time. Of course if you are doing outside US/CAN things are a bit different.


No you cannot bill them 80 on day 30 (Well maybe you CAN but you should not). You bill on day 45. Most isos/banks do not allow that many billings in one cycle, you send out a month supply on day 1, you bill for that same supply day 14, and you ship out and bill another supply on day 45 and then every 30 after.

Most people check statements at least monthly but it is getting more frequent that people check every day or every week with online banking and it is just going that way more and more every day.

Paper_Chase said:

Yea, my thoughts exactly.

If they phone into one of your reps, it makes more sense to just offer a full refund back onto their card.

But if they phone their CC company directly they are screwed.

With rebills I guess it is imperative your toll free number gets displayed with the merchant name on their CC bill.

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Again here is the difference between good customer service and bad. A good rep knows when a customer may call a bank or dispute. A good rep de-escalates the call and finds a solution that is agreeable to both parties. Often this is a partial refund.

Yes, number needs to be on the descriptor. Center needs to be open preferably 24/7 or as close to that as possible. If customer calls customer service and they are closed, they will call the bank next.

CCarter said:

^^ This. Exactly how the game is played.

Also, yes, your original gut instinct of the stupidity level is accurate. Fact that you only got 11% chargeback is a good sign most people probably don't check their statements like they should. Also, customer services mazes... lol But the Nutra rebills, if they are stupid enough to fall for a $5 initial offer on some online diet stuff... well, you can figure it out from there.

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11% is insane if it is anything before month 5 or 6 and volume has not fallen dramatically.

productionhead said:

I don't think these people are stupid. I think they are just trusting.

If all of these rebills put "We will charge you $80 a month in big bold letters and oh, our product doesn't work lol", no one would buy.

So in the end, the side operating on dishonesty and malice outweighs the side with stupidity on it.

And as time goes by, this is bad for consumer confidence in the Internet... but ya'll need to put Rolls Royce kits on ya'll Nissans right?

Click to expand...

There is a right way to run a trial or rebill and a wrong way. The right way is to make customers agree to the program before they are able to continue. This means following the FTC guides on trial and continuity billing. Find a way to run the right way and still convert. Often times this means you will not be as profitable as the guys running the wrong way. It will mean the difference between being profitable on month 1 and not having to float a lot of cash, and Not being profitable for 2-3 months and having to float cash for a long time. It sucks but that is the way it is. Hope the bad guys get slapped and 4 don't pop right up after they do (Good luck, that is not what happens). You can try to run cleanly and make a decent amount of money if you do EVERYTHING else right or you get tempted because every other offer you see has removed the check box on page 2 and why the heck can't you and now the networks and affiliates are telling you that the page does not convert well enough with a check box sorry. Just hope this happens at the start and now 3-4 months in because you will get burned and lose everything as your accounts burn up.

Kaedus said:

Are you load balancing your MIDs?

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productionhead said:

"Load balancing" MIDs does nothing to reduce chargebacks on a percentage basis

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Seems to be some confusion on what load balancing actually does. First, I'd like to say that you always want to rebill a subscription on the same merchant account you started it on and not switch to another account (MCC Profiling does exist and is starting to become more of a big deal than it was before.). High charges are more likely to decline if they are billed on a new merchant account than if it is the one that it has started on. Also, some merchant accounts require a CVV on every transaction Unless you got it on the initial transaction in which case you don't need the CVV. In those cases its obviously required you keep it on the same account but even without that, you want to keep it on the same regardless to avoid a higher % of declines and chargebacks.

Load balancing is pretty important to make sure subscriptions have enough room to bill without going over. You need to know what that fair amount over is so you can set the balancer on the MIDs to the right amount. If you have 100k accounts, the fair amount might be 120-125. Most load balancers do not take into account cancellations, and declines that Will happen with subscriptions. Just because the balancer says MID 1 will bill 100k this month and we are only 10 days away from the end of the month does not mean we will do 100k, we may only do 90k. It changes every day. Load balancing only becomes a big deal when you start having more than a few accounts to keep track of, then it starts to really show its value.

Where load balancing also helps a lot is if you have upsells, or secondary low risk transactions. These low risk transactions can be balanced toward the merchant accounts with higher chargreback ratios to add count and decrease cb ratio.

o hai guyz said:

True, but couldn't they just chargeback everything once they finally notice it? I asked Visa/Amex from a customer's point of view how long I have to dispute charges, and they said it can be done up to 6 months from the purchase date. So even if you've charged them $5 + $80 + $80, why wouldn't they just dispute everything?

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They can and often do. Just hope they contact your great customer service first and they arrange a deal.

Also it is important to keep in mind that customers do not always win disputes. The charges are valid and the customers need to know that they were valid. They need to be walked through the purchase and shown where they agreed to the purchase and they need to know that the company will counter dispute all disputes and that if the company comes out a head they will not be eligible for a refund. You can win your chargebacks if you have done everything right and the customer is in the wrong. Again, you need to make sure you are in compliance with all the correct guidelines and laws or this does not work.

productionhead said:

Even the credit card representatives will ask you if you tried to deal with the merchant first. [ on the customer side of the chargeback initiation process ]

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Correct. A lot of times a bank will call with a customer on the line and after your great customer service agent explains the program the bank will advise the customer to accept a partial refund or to setup a return.

productionhead said:

Amount of work for who? The bank employees formulate the decision to process the chargeback or not mostly on the testimony of their customer. They do look into tangential signals such as the merchant's customer service and the billing policy that is apparent on the merchant's website, and also if the merchant being disputed against is a story they are familiar with (I'm sure every bank employee in the nation has heard about a $5 diet pill turning into $160 charges by now)... then they process the chargeback under whatever reason code makes sense.

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Depends on the bank. However you never want to take a chance and hope a bank rep is one that will see the situation how it really is. If a customer has contacted a bank AFTER talking to your customer service team you have already lost.

However, bank employees also know that companies counter dispute chargebacks and they know that customers lose a great deal of them. There are some reason codes that are harder to counter dispute than others (Some are borderline impossible to counter dispute, a good bank rep may know the way around the codes but most do not).

mpbiz said:

Use a 1-800 number. Put a quick 30 second recording on it saying "If you have any questions, comments, concerns, or would like to talk to one of our customer service representatives please send a quick email to customerservice@ohaiguyz.com and we'll respond back to you right away."

Answer those emails promptly. Make sure your website name is the name that is showing up on their cc bill.

Also, why are your competitors not having the same problem?

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No. Do not do this. Do not ever do this.

zackmorris said:

There's a reason why I run a 15% refund rate and a 1% chargeback rate on my nutra campaigns. Customer service is the most important piece of this game. Don't cheap out and use some bullshit offshore center either... I was able to leverage my large domestic call center for this-- others aren't so lucky.

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15% is reasonable. However 15% of gross now is actually 20-25% 3-4 months later with no new transactions, just make sure that is built into your model. Unless you are at like 8-10% of gross now in which case, 15% may be reasonable. If there is one thing that wakes you up quick its putting that realistic refund % actually in the estimates and not the % of gross + a few % points that you were running at.

Yeah domestic call center is key. Good reps are key.

zackmorris said:

For sure on the item name for CC-- mine is: SNKOIL INC 8001231234

You need to make every attempt to resolve this before it goes to THEIR bank for resolution. Have a corp site with a quick and easy to use cancellation system. Have a call center that provides ALL recordings to you, provides refund / complaint metrics / etc. Have your customer service # on EVERYTHING- from invoices to shipping notices to the return address on the envelope...

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Yeap.






At the end of the day, you must run a legal and compliant page and offer for any of this to be of use. None of this matters if you are running the Wrong way or illegally, in which case you do not deserve to continue processing.



Long reply. PM me if you have questions or need intros for anything.