Learn about payment disputes and how you can prevent and address a dispute.
In this article:
- Payment Disputes
- What are the different types of disputes?
- How to avoid and prevent disputes from happening
- How do I know if I have a dispute through Kajabi Payments?
- How to respond to a dispute with Kajabi Payments
- How do I counter a dispute?
A payment dispute, also known as a chargeback, is a mechanism that allows customers to dispute a charge on their statement directly with their bank or other payment provider. Disputes can arise for a variety of reasons, including but not limited to unauthorized charges, billing errors, or charges for goods or services that were not fulfilled to a customer's satisfaction. We'll dive into each type of dispute later.
What are the different types of disputes?
There are several types of payment disputes that you may encounter. Below, we will introduce the various types of payment disputes.
These disputes occur when a transaction is made on a credit card or payment method and the buyer claims that it was made without their authorization or knowledge.
Fraudulent disputes fall into three main categories:
- Legitimate Fraud - This can happen if the payment information is compromised through various means such as theft or a data breach, and a fraudster uses a payment method to obtain services without the true cardholder's knowledge or authorization.
- Friendly Fraud - There are also cases of "Friendly fraud" where there may be multiple users of a single payment method (i.e., spouses) and one user does not recognize charges. These are not legitimate fraud, and you may want to counter this dispute by submitting evidence.
- Bad Actors - This group consists of rightful cardholders who knowingly make purchases but then claim fraud in order to obtain goods or services for free.
Quality of Goods or Services
These disputes occur when the cardholder is not satisfied with the quality of goods or services purchased. This can include issues such as non-delivery or incomplete services, unsatisfactory services, or poor customer service.
Refund Not Processed
If a customer is expecting a refund based on a refund request raised directly with you and does not receive it in a timely manner, they may seek reimbursement via a dispute. If you are able to show that the customer has already been reimbursed, you can provide evidence to have the dispute reversed in your favor.
Most common on subscription purchases, these disputes occur when a buyer claims to have canceled a transaction within the scope of your Terms of Service, but you have charged them anyway. This can happen if the cancellation is not properly processed or if there is a miscommunication between the buyer and seller.
These disputes occur when a buyer believes they have been mistakenly charged multiple times for a good or service. While there are legitimate occurrences of this via billing errors, it is also not uncommon for the concept of upsells or multiple product purchases in quick succession to cause confusion on the cardholder's behalf.
How to avoid and prevent disputes from happening
Think of a dispute as a buyer requesting a refund directly from their issuing bank as opposed to contacting you for a refund. Disputes are an inherent part of doing business and can never be completely avoided no matter how clearly you present your business policies and terms.
However, there are a few best practices you can implement to strengthen your business.
- Keep Accurate Records - You should keep detailed records of all transactions. This includes receipts, invoices, and any communications with the customer. This can serve as compelling evidence when attempting to counter a dispute.
- Provide Clear and Accurate Descriptions - You should provide clear and accurate descriptions of products or services. This includes any features, benefits, and limitations. This helps to set expectations with customers and reduces the risk of disputes from arising as a result of any misunderstandings or miscommunication. When disputes arise, being able to show that appropriate expectations were set with the cardholder prior to purchase can serve as good evidence.
- Respond Promptly - Disputes can be prevented by prompt responses to customer complaints and prevent issues from escalating.
- Offer Refunds and Exchanges - You should be willing to offer refunds or exchanges to customers who are not satisfied with their purchase. It is also important to make sure you have a clear refund/exchange policy on your site that is disclosed to customers prior to purchase.
Still have questions? Let us know your question below to have it added to the list or reach out to Support if you need additional assistance. Thanks for being the best part of Kajabi!