Introduction to chargebacks

There are often similar patterns to purchases who are later charged back. If you know these patterns, you can sometimes prevent chargebacks. However, there will always be random chargebacks that you just can’t stop. It’s just a part of the business. “Luckily” the really big ones can often be prevented.

I have a chargeback rate of about 0.001% of total money earned. That means the amount of money ever charged back is only about 0.001% of what I earned. So from every thousand dollars I earn, I have to prepare to pay back one. Only 1$. If I calculate it based on total amount of sales, my percentage is even lower. Not even 1 in 5000 of my customers claims a chargeback (this can and will be different for other stores).

A chargeback is a sort of robbery, so we can’t really blame the clipsite we work on. Suppose you run a shoe store and some guy steals a pair of shoes – you can’t really blame the shoemanufacturer for that theft. A chargeback most often occurs when a credit card (info) was stolen and then used to make the purchase.

You have to discriminate between a chargeback and a refund. A refund is something we all do. If we buy pants and they don’t fit, we can take them back to the store where we bought them and get our money back. If a clip of mine has a glitch where it stops playing in the middle of things, the customer has all the right to get the money back. Although c4s support would first ask you to upload a good version of the clip and then offer that as a replacement first, which is better for us producers.

So a refund is just a normal process and it doesn’t cost anyone any fees. In the digital world, it’s often not possible to “return” the goods for the money, so solutions like the one I mentioned are more common and there are even no-refund policies.

Introduction to chargeback fraud prevention

Naturally, if someone got money deducted from their credit card, although they never authorized that purchase, they call the bank. The bank then charges the money back from the clipsite and the clipsite deducts the money from your account. The clipsite also has to pay a pretty rough fee (about $25) to the bank. For every chargeback.

  • Chargebacks can be fought by the clipsite and if won, you will still get that money. Never happened to me.
  • Chargebacks are almost always honored, even if they go way back. Normally, more than 6 months is unusual, but I have had an order charged back almost 2 years later. So it’s possible.

Of course we never know if the card was really stolen or someone just made up a story because they spent too much, because their wife found out or for any other reason. Whatever the case, the person will get blocked for life from a serious clipsite if they ever made a chargeback. It’s a poor solution in case the card was really stolen, but it’s a better safety measure then doing nothing. Whoever considers a chargeback knows they’ll get blocked – and might decide to swallow the “mis-purchase” rather than call the bank and make up a story. And whoever used that card can’t ever use it again.

Since banks / payment processors blacklist clients, it could be that such a charge back impairs the person from buying somewhere else in the future.

Note: My chargeback rate is reported only from my clips4sale studio. Clips4sale has a long track record and probably the biggest blacklist and best fraud prevention of all clipsites.

I have received countless emails from wannabe customers who were blocked on clips4sale and asked for other ways to purchase from me. Only you can decide how you handle these requests, but I am always very suspicious about those. To be fair, I have had one or two customers who really got blacklisted for nothing. They just didn’t get past the fraud prevention systems based on a combination of name, country and other information, although they never did any fraudulent activity. This is one of many cases where it helps to know your customers, which is why I recommend putting a way to contact you on your store page (like a simple email address you created especially for your store).

These should trigger your chargeback alert

A good example of a suspicious purchase is a female name. There are males with female names and there are also (very few) females who buy clips. A female using a credit card on a clipsite for fetish / porn / adult content is still such a rare event, that it instantly triggers fraud prevention mechanisms. In other words, any female buying clips from you is a HUGE red flag: it’s probably fraud.

Here are some other things that should make you worry (a little):

  1. Big orders. They get us excited and make us worry at the same time. On clips4sale, all first time purchases above a certain amount (won’t mention it here, because who knows who is reading this. One downside of making content freely available to you) get put on hold, until the person verifies the purchase by sending some documents. Some other sites eat the whole chargeback, so you never have to worry – some even let you pay the fee. Some let you get an insurance for extra money. Always read the terms on chargeback policy of your clipsite.
  2. Two or more semi-big orders from the same person on the same day. Could be someone knowing about the “certain amount” I just mentioned and trying to stay below the limit while taking as much as he can out of that stolen credit card.
  3. The same customer placing 1 clip orders throughout the day. Doesn’t have to be a problem, but in my experience, those are more often fishy.
  4. Customers who hid their personal information. As customers buy from us, we get some basic personal info about that that is necessary to run our business. It’s actually less info than giants like amazon retrieve from their customers, but it’s enough to, e.g., find out who spread your clips on the internet. People hiding their info could be up to no good, but in our special case, they could also just not want to be associated with buying porn, which most people today would find understandable. Still a warning sign and I follow those purchases closely. Note: On clips4sale, using the special clipcash card can also hide the customer info from you.
  5. Customers who bought the same clips twice or three times. This is normally an easy refund, but sometimes complications can make this end in a chargeback. Think about poor support or the customer overreacting.
  6. Customers from unusual countries. Think about an order from Sri Lanka, Romania, Iran, Nigeria etc. Could be just a rare event, but could also be a sign of fraud.
  7. Two or more orders from the same city / country / place but with different names. Not saying that two orders from London in one day have to be suspicious, but when you get two or three orders from a small village in the middle of nowhere, from different people there, then either they founded a club to support you (very rare) or some guy there stole some cards and is having fun (probably what is going on) or some kid is using the credit card of mom, dad and an uncle to spread the amounts (basically the same as a guy stealing credit cards). I have had both, cases two and three, so this one is a definite red flag in my book. NOT talking about big cities, but the smaller the place, the more obvious this one is. I think you get the idea, right?

Algorithm of chargeback control

  1. The first thing I do when I suspect something going on, is searching my records for the customers data. If I find an older record from the same customer, it’s all good (since on c4s, he would have been banned if he charged back that older order). Older means, in the best case, more than a year old. At least 3 months would ease my mind. I keep all the records of all the orders and you should do the same. It’s a major help for many things, not only fraud prevention.
  2. If it’s a big order, let’s say more than $50, I’ll contact support immediately with a subject line of “urgent: fraud suspicion” or something like that. On clips4sale, I give them the SO# or CLIP ID# so they can look up the records across all of c4s for that customer. Very often I get an email back that the customer has been known for years and it’s alright. That’s pretty nice to hear. Note: I mostly give the SO# since you can download clips with the CLIP ID# and you never know who also reads that email.
    Sometimes I get an email that the purchase has been frozen and they look into it, which is also comforting. That means the customer can’t download anything until verified. If he fails to verify, there will be a refund but he didn’t get anything. So it’s as if it never happened. Bad luck, but no biggy.
  3. Look up the person on the internet with the information you have. See if they “exist”. “Existing” people always put me at ease, because they don’t charge back. If they do, I know where to contact them… I once had a huge order, first time customer, no c4s track record. Found out it was a local politician, pretty well known. I knew he wouldn’t charge back from that moment on, because the slightest hint of this activity would have ended his career. By the way, thanks for that purchase 🙂
    Note: I don’t have to stress how important it is that you handle private data professionally. Never let out any information about your customers. Handle disputes discretely. I wouldn’t even use dailypay. Don’t let anyone into your account. Worst case, you would destroy not only your business, but your life.
  4. If it’s a female name, see step 2.
  5. If it’s number 7 from the list above, I contact support as well. Even when there are only small amounts. Because first of all, this could be a thief and second, most importantly, a minor. And we don’t want any of those to have our clips.
  6. For all others or small orders, I just take a special note and leave it be. I can’t be worried about whether or not $5 will be charged back the next days or not. If I were, I couldn’t sleep at all. Instead, I make a new clip and earn another $5 in the meanwhile.


Final notes on chargebacks and tips for prevention

Chargebacks in clipstores are not as common as you may think/fear. My rate is far below any “high risk”, still, payment processors would place me into that category. It’s a scheme. A rate of below 1% is normally alright.

If you use the algorithm and spot the suspicious orders, you can probably have a low rate as well. Please note that I work a lot though, so I see fresh orders almost immediately and can react fast.

I have a very good connection with my fans, I often know who placed which order in a glimpse. Get to know your fans, that will reduce fraud and sharpen your radar. It will also increase sales if you know how to use that information.

Finally: Don’t give any “normal” guys a reason for chargebacks / refunds. Check your clips before uploading: does the sound work? Does the clip play all the way through? Does the size of the uploaded file match the size on your computer? The length? Don’t give false impressions in your preview / gif, don’t mislead, don’t clickbait. Don’t write wrong descriptions. These are all reasons for disappointment which can lead to chargebacks and refunds.

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