Lesson #36 Reducing Chargebacks
Written By Titmowse

In Lesson #35 we learned what chargebacks are. To refresh your memory: A chargeback is a credit card version of a refund, except worse. A merchant can’t please every single customer and refunds are to be expected but when you’re an adult paysite owner, chargebacks can cost you your future.

Whether you process through an Internet Payment Service Provider (IPSP or third party biller) or you have your own merchant account, chargebacks equal bad news.

Credit card payments are the primary source for most of your income. When it comes to credit card companies, there’s basically only one that will approve processing for adult paysites and that one is VISA. VISA considers Internet merchants to be high-risk. VISA has a limit on the percentage of chargebacks you’re allowed as an adult Internet merchant. If you exceed your chargeback limit VISA makes you pay a hefty fee and they also put a portion of your assets on hold. On top of that, if you continue to have too many chargebacks, after a certain point, VISA will stop processing for you completely.

That may not sound fair. That may not sound right but that’s the reality. You can offer alternative payment methods to your future paysite members but this is a business based on impulse buying. Credit card payments go hand-in-hand with impulse purchases. You can make money with online checking or phone-based payments but you’ll make three times as much money by offering the credit card option to your customers.

While nothing is ever absolute in this business there are things you can do to help insure low chargeback ratios:

Fulfill Your Promises

Nobody likes to be cheated or lied to. If you state in your paysite tour that your member’s area contains over 50,000 images, you better have at least 50,001 images in your protected area before you go live. If you guarantee that your paysite will update weekly, then update weekly. If you claim your paysite is for panty lovers, then the majority of your member content has to be panty content. Your paysite tour is your promise to your customer. If you break your promise then your members have every right to demand a refund from you.

Avoid Dirty Tricks

Here’s an example of a dirty trick. You offer a 3-day free trial to a surfer. You have them fill out a form and require that they provide their credit card number in order to receive the three-day pass to your member’s area. You state in your membership Terms of Service that if the user neglects to cancel the membership before the allotted time period they will be charged for a full month’s access to your paysite. Then you bury the cancellation page/link so deep; it’s almost impossible for the average surfer to locate it. This is a dirty trick. It’s unethical and it pisses the surfer off. Pissed off surfers charge back.

There are other dirty tricks and while such tactics might be technically legal and temporarily profitable, in the long run, you’ll lose. You’ll lose the trust of your surfers and you’ll lose income because your chargeback percentages will be high. Ultimately you’ll end up losing your ability to take credit card payments altogether.

Provide Quality Customer Support

Imagine that you’re in a restaurant and you find a hair in your soup. Chances are you’d show the hair to your server and ask for the manager. Now, imagine if the manager wasn’t there to hear your grievance. How would that make you feel? You’d be hopping mad and you would be perfectly justified.

Now think about your members. Maybe one of your site scripts makes their computer crash. Maybe their Firewall software prevents them from entering your member’s area. Maybe they simply have a question. Whatever the reason, if a member takes the time to email you or call you then you still have the opportunity to make things right and keep that customer. If you ignore them or you’ve hidden your contact information because you “can’t be bothered” then you will get chargebacks.

Of course there are credit customers that lie. Of course there are people who like to defraud adult web sites. Unfortunately for you, VISA tends to favor the cardholder when it comes to chargebacks. It’s unjust but for the moment, there’s not a heck of a lot you can do about dishonest credit card customers.