I launched my SaaS a couple of months ago. It’s a platform that helps you efficiently obtain web design leads from around the world, even for businesses without websites. So far, it’s been performing well. The platform uses a one-time transaction model instead of subscriptions. You pay once for a set amount of in-app credits, which you can then use to acquire web design leads.
However, I’m currently dealing with an issue involving a client who spent $100 to purchase a large number of credits. They used some of those credits, but according to Paddle, which I use as my Merchant of Record, they initiated a chargeback. I received the chargeback notification today, even though the customer made the purchase just yesterday, resulting in an additional $100 showing up in my balance.
My platform clearly explains how it works, and I’ve even included a demo on the landing page for users to see its functionality.
Should I let them continue using all the credits for free? I’m concerned that this could lead to abuse, where someone buys credits, uses them, and then files a chargeback for a refund.
How should I approach this situation? My Terms and Conditions state that once a payment is made and the customer receives the credits, refunds are not available unless there is a server-related issue, as they are expected to use the credits once purchased.
Most of my customers are satisfied with the app, but this is the first chargeback I’ve encountered.
I’m not sure about Paddle, but Stripe has an extensive section in their documentation regarding chargebacks.
Here’s the best practices document: Stripe Best Practices.
If I remember correctly, they suggest disputing every chargeback and providing relevant evidence. They also recommend contacting the customer to negotiate the withdrawal of the chargeback.
So, you might want to reach out to the customer and offer to refund their money if they agree to withdraw the chargeback. You should do this anyway and include it as part of your evidence.
Make sure to submit the section of your Terms and Conditions that includes the “no refunds” clause, along with evidence that they agreed to those terms.
Additionally, provide proof that they used some of the credits, that they could have bought fewer credits, and that the credits they used delivered the product they expected.
At some point, you will need to cut off their accessI’m not exactly sure when, but the Stripe documentation might indicate when is appropriate.
Ultimately, the best outcome would be to refund the customer and have them withdraw the chargeback.
You might also want to think about implementing a limited refund policyperhaps offering a full refund if less than 5% or 10% of credits are used within a 30-day period. This could help address situations where customers feel the value of the credits wasn’t as represented, which can be challenging to dispute.
Provide proof that they accepted the ToC as well as the section of the agreement that contains the “no-refunds” clause.
Do you mean that I should ask them to accept the Terms and Conditions which specifically state that there are no refunds unless there are server issues just before they make a purchase? Would it be preferable to have a brief notice on the checkout page that states that there are no refunds, unless there is a server error?
That’s more of a legal question, as you’re asking about the threshold a user must meet to show they’ve agreed to your terms and conditions if you plan to enforce them legally.
However, I believe it’s more considerate to have a reasonable refund policy that strikes a balance between the needs of the customer and your own. Chargebacks can be much more damaging than simply issuing a refund. If the chargeback goes through, you lose the money, incur chargeback fees, and receive a negative mark on your Paddle account.
Depending on where your consumer resides, you may be legally compelled to offer a grace period on products or services purchased online. If your terms and conditions include a clause about no refunds, that language is illegal. Refunds are not available for certain items, such as custom-made goods. You, for example, get a personalized birthday cake.
I can provide a refund after they purchase in-app credits, but it doesn’t seem reasonable to do so once they’ve used the credits for the app’s main purpose: acquiring leads. Once they spend the credits to obtain leads, they already have access to the information. They can easily take screenshots, and the leads are saved both in the remote database and in their local storage, allowing them to use the data however they want, even if it’s removed from the remote database.
So, could I implement a 30-day money-back guarantee, but only if they haven’t used any of their in-app credits?
If they have used some credits, you can offer a refund for the unused portion, but you wouldn’t refund everything. They might be trying to get all their money back. For a chargeback request, the bank will ask them if they contacted you before initiating the chargeback since it’s a costly process. This implies that the buyer may have misrepresented your responsiveness. Ensure your site has easily accessible contact links, as banks will check those.
When you receive a chargeback request, reach out to the client to ask what the issue is, as they should have contacted you first. Decline the chargeback since you have proof of usage on your side, and offer a refund if necessary. This could also be a good opportunity to discover any issues they have with the platform or leads, allowing you to engage with the client and learn from the experience.
Hi there! I apologize for learning about the chargeback issues. Definitely don’t let them keep using the credits for free, that could totally be abused. You are correct there as long as you abide by your terms and conditions. Check out Chargeflow if you’d want to handle these chargebacks more effectively. It can save you a ton of time and assist you in resolving these conflicts.