What is this chargeback?
The cardholder withdraws permission to charge the account or cancels payment for subscription; merchant neglects to cancel a recurring transaction; merchant processes a transaction after being notified the cardholder's account was closed; merchant raises the charge amount without informing the cardholder.
- The cardholder terminated the recurring payment plan or revoked authorization, and the payment plan did not mandate that the cardholder pay the disputed amount.
- You increased the subscription amount charged to the cardholder, but didn’t notify the cardholder in advance.
- The cardholder requested cancellation of service, but the you made a mistake and failed to process the subscription cancellation request.
How to Respond
- Transaction documents showing that the cardholder approved each charge on their card.
- Proof the cardholder did not cancel the plan at all, or canceled it in violation of your stated terms.
- Evidence that the cardholder failed to cancel the recurring payment plan at least 15 days before their card was charged.
- Proof that you already refunded the cardholder.
- Proof that the disputed amount was correctly processed and that the cardholder did not reference a valid cancellation number when they filed the chargeback
- Language in your recurring or subscription billing agreement that states that the cardholder is nonetheless responsible for the amount under dispute even though the cardholder already canceled their recurring purchase.
Prevention Tips
- Terminate recurring transactions when the cardholder requests cancelation
- Consider a no-strings-attached cancelation policy
- Don't increase the transaction amount without the cardholder's consent
- Don't prematurely bill the cardholder
- Send notifications for upcoming charges
1. Embrace Transparent Communication - Ensure your terms and conditions concerning recurring payments are well drafted, easy to understand, and fair to all parties involved. For example, recurring or subscription plan agreements should explicitly state the amount of the ongoing charge, the frequency of the billing cycle, the minimum lock-in or commitment period, and the procedure for canceling a subscription, including the fees or penalties that cardholders will incur when doing so.
2. Obtain Customer Authorization - Retailers with physical stores should ensure that cardholders are aware of the recurring nature of the transaction and authorize both the initial and subsequent transactions. For example, you should obtain consent from cardholders before keeping a card on file for future payments.
3. Have Simple Cancellation Procedures - Some merchants have complex cancellation processes that make it difficult for customers to cancel subscriptions, or understand whether they will be on the hook for early cancellation penalties. This lack of transparency is frustrating for cardholders. Data from the 2024 Cardholder Dispute Index reveals that nearly 88% of cardholders want their banks to have the ability to cancel subscriptions on their behalf. The fact that banks lack that power means that cardholders often turn to chargebacks as a solution to their subscription woes.
4. Offer Good Customer Service - Be available and responsive so that customers can reach you through phone, email, and live chat whenever questions about orders, payments, or future charges arise. Train your staff to address customers’ issues promptly, and empower personnel to proactively offer refunds to cardholders who are dissatisfied with their purchases.