Comment by chatmasta | Hacker News Reader

Comment by chatmasta | Hacker News Reader

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I am perfectly okay with taking people's money. In fact, in the past I managed $20,000 of monthly recurring revenue. In that case, it was set to auto bill. However, I found that many customers, rather than coming to the site or emailing support to cancel, would simply submit a chargeback on their credit card. Obviously that did not stop recurring billing, so then they would submit another chargeback the next month. Sometimes this was compounded by the fact the credit card was also stolen.

The problem was likely due to cancellation requiring an email to support, rather than a way to do it on the site. That business was selling proxies to SEO people. I eventually let it whither because 1) I was not happy with my customer base's use of the product, and 2) chargebacks got out of control due to the above fact, combined with fraud. At one point it had a chargeback rate of 14%, and close to half of those were stolen credit cards. I'm now starting a VPN business, which will face many of the same problems, so I'm merely wondering the best way to mitigate this one particular reason for chargebacks.

Seems you have a fraud problem, not a chargeback problem. I'd use a fraud prevention service such as Sift Science to reduce the fraudulent credit card usage.

For legitimate users that are causing chargebacks, the following helped reduce it for us:

1) Emailed invoice every time there's a charge

2) When canceling, also sending an confirmation email stating the date of cancelation (so if they still receive a final charge, they'll know it's because cancelation date was after that final charge).

3) Changing the "Statement descriptor" for the credit card charge to be our domain name instead of our company name.

Since implementing those changes our chargebacks have gone down to almost zero. Hope it helps.

> rather than coming to the site or emailing support to > cancel, would simply submit a chargeback on their credit > card. Obviously that did not stop recurring billing

Why not? If I receive information that a payment has been stopped, I deactivate their account and send them an email that their subscription has been canceled. Unless the customer sends a new payment, the account stays deactivated and I make a +1 under "Lost Customers".

The short answer is that the payment system I was using at the time had no easy way to do this programmatically. Remember, a chargeback is not a missed payment. I would receive the payment on time, and then some arbitrary 15-20 days later I would get a paper envelope in the mail notifying of a chargeback with last four credit card numbers XXXX. It was a mess.

But yeah, all these are good points and also reasons I shut down the business. This time around I can apply all these lessons learned.

> This time around I can apply all these lessons learned.

Good luck. :-)

I would be annoyed if a SaaS didn't auto-renew by default. And I'd also be annoyed if I had to send an email to cancel it.

An alternative I also like is just to add account credit for metered usage.

You have to make it both easy to cancel, and easy to find out how to cancel. If they have to look for more than a few seconds or you make them jump through hoops, they're going to just do a chargeback.

>Obviously that did not stop recurring billing

Obviously? If I get a chargeback from a customer, I cancel their service.

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