6 Ways to Avoid Recurring Billing Chargebacks

6 Ways to Avoid Recurring Billing Chargebacks


In the final post of our guest series, the Chargeback team outlines the best practices for avoiding recurring billing chargebacks.

Now that you know what chargebacks are and the reason codes behind them, you’re better equipped to ensure your business is setup for subscription billing success.

1. Communicate, Communicate, Communicate

Communication is of utmost importance to subscription billing merchants. The lines of communication should be totally open between you and your customers. To accomplish this, you must have both proactive and reactive communication channels.

Proactively, you should send notifications to the customer each month before and on the day of billing. Whether the notifications are by email, text message, or otherwise, the customer should never wonder when or why they’re being billed.

Reactive communication means that the customer should have access to multiple ways to contact your customer service team. A contact phone number should be clearly displayed in email communications and on your website. In addition, customer service emails and chat capabilities should be available to customers who need to resolve issues.

2. Optimize Your Merchant Descriptor

The merchant descriptor that appears on customer billing statements is clearly recognizable. Optimize your merchant descriptor by working with your payment service provider. Merchant descriptors can differ greatly by the customer’s issuing bank. For example, merchant descriptors on Capital One’s online portal are relatively rich in content.

Hotwire Example

As you can see, Hotwire’s merchant descriptor is actually “HOTWIRE-SALES FINAL 866-468-9473 CA 94111 USA”. Not all online portals display information in excess to the merchant descriptor provided. The online portal for PNC lists merchant descriptors in their raw form.

Audible Example

The merchant descriptor for Audible is “Audible adbl.co/bil NJ”. These two merchant descriptors display the different ways merchants can customize the descriptors variables. The variables are usually your DBA, or doing business as, name and the city in which you operate. The DBA name is typically limited to 22 characters and the city field character limit is 11. For ecommerce merchants, it’s beneficial to include a URL or phone number along with your operating city.

Hotwire chose to include a customer service phone number in their merchant descriptor. While Audible chose to include a shortened URL. Both methods are great ways to make sure customers can contact your business if they are at all confused about the transaction at hand.

3. Create a Helpful FAQ

A well-written and comprehensive FAQ can be the difference between receiving a customer service call and allowing the customer to solve their query on their own. It’s critical for subscription billing merchants to have a portion of their FAQ dedicated to subscription terms. Birchbox is a subscription billing merchant that does just that with their FAQ page.

Birchbox Example

It’s also important to treat your FAQ page as a living document. When terms change or customer service identifies additional topics that are being discussed frequently, you should update your page to reflect said changes.

Birchbox also includes frequently asked questions around billing and payment practices. Since these topics often go hand-in-hand with subscriptions, their inclusion is a smart move.

4. Personalize Your Offerings (and Be Flexible)

Many recurring billing chargebacks are validated because the customer did not use the product provided by the merchant. Avoid this dispute by personalizing your product offering to the individual customer.

For inspiration, once again take a look at Birchbox. Subscribers to the monthly beauty box complete a Beauty Profile detailing unique aspects of the customer’s skin and hair care regime as well as personal style.

Birchbox Beauty Profile Example

Flexibility in subscription opt-outs is another side of offer personalization that subscription merchants must consider. An opt-out of service does not need to lead to a permanent customer loss.

Audible approaches customer opt-outs in a unique way. When a customer cancels their subscription, they are given the option to put a ‘hold’ on their account. This allows the customer who is not completely dissatisfied with the service an option to keep their account open. It also allows Audible to identify customers that need help seeing the value of the service.

Audible Membership Example

5. Clearly Display Subscription Terms

The subscription billing terms need to be included in your terms and conditions, obviously. But the most important aspects should be clearly displayed where the customer or potential customer will see them.

BarkBox does this very clearly on their sign-up page.

BarkBox Signup Example

The text “Plans automatically renew. You may cancel at any time.” clearly communicates the most important aspects of the recurring billing terms.

It’s also beneficial to collect feedback from consumers on these terms and make adjustments when necessary.

If you utilize free trial periods, clarity of subscription terms and agreement is of vital importance. Provide the customer with an opt-in at the end of a free trial. If they don’t agree to or confirm an ongoing subscription, the product or service you provide should be discontinued.

6. Optimize Customer Lifetime Value

Customer Lifetime Value (CLV) is the most important metric for driving long-term profitability and cash flow. Subscription billing merchants see a direct correlation between customer service interactions, chargebacks, and CLV.

By optimizing CLV through automated A/B testing of customer service interactions, subscription merchants can segment customers and customize the interaction by cohorts.

Not only does optimizing CLV through testing lead to reduced recurring billing disputes through helpful customer service, but it also gives you the opportunity to segment your customer base.

Optimizing CLV makes everything from marketing communications to product personalization even more relevant to your customers, helps reduce chargebacks, lift profit and reduce customer service costs.

Avoiding chargebacks is not a set-and-forget initiative. Subscription billing merchants need to understand the types of chargebacks they’re getting and the reason codes associated with them.

Only through this are the most comprehensive compelling responses created and necessary changes are made to inefficient business operations.

If you need help crafting your in-house approach to chargeback management, check out the latest guide from Chargeback. Managing Chargebacks In-House is a 40 page guide full of checklists, insights, and assessments to get your company’s dispute resolution off the ground.

Managing Chargebacks In-House Guide

Looking for information beyond this Chargeback.com article? Visit the Chargeback blog for more awesome articles. If you’re ready to find out how RevGuard works with Chergeback.com to provide a complete chargebacks solution – contact us!

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