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What percentage of sales turn into chargebacks?

by GettingOn
14 replies
I know that every industry is different. Some have higher chargeback rates than others.

I wanted to know from experienced online merchants what percentage of their sales turned into chargebacks.
#chargebacks #percentage #sales #turn
  • Profile picture of the author Alexa Smith
    Banned
    "Chargebacks"?!

    You realise that "refunds" and "chargebacks" are two very different things, with collectively very different consequences and ramifications?!

    One would certainly hope that not too many people's chargebacks are over 1%?
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    • Profile picture of the author SARahman
      Originally Posted by Alexa Smith View Post

      "Chargebacks"?!

      You realise that "refunds" and "chargebacks" are two very different things, with collectively very different consequences and ramifications?! One would certainly hope that nobody's chargebacks are over 1%? :confused:
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      • Profile picture of the author Alexa Smith
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        LOL, thank you very much, no - nothing like that, I'm afraid (and no interest/involvement in IM/MMO niches, and therefore no list or anything to promote/sell here at all).
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    • Profile picture of the author brutecky
      Originally Posted by Alexa Smith View Post

      "Chargebacks"?!

      You realise that "refunds" and "chargebacks" are two very different things, with collectively very different consequences and ramifications?!

      One would certainly hope that not too many people's chargebacks are over 1%?
      I was just going to say the exact same thing but I noticed your post when scrolling down to respond

      Around 950 sales so far this year and I have not had a single charge back.
      I get around a 1.5% refund rate over all though.
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      • Profile picture of the author Jarvis Edwards
        There is a small percentage (possibly very small)..

        of people/companies who may become the lucky recipients of fraud-committing buyers.

        Buyers who planned on getting-the-goods-and-charging-'em-back from the get-go.

        Just a thought.
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  • Profile picture of the author Dennisknows
    Really depends on what you're selling....

    For example, I promote an offer that pays an advanced commission. When members signup thinking they are gonna make $1,000s a week doing nothing, they are more likely to quit....

    Being that the company paid an advanced commission, they are going to get what's left (Advanced commissions -(minus) months used service)

    Depends really on how you market too. If you market something wrong, then people are more likely to be disapointed when they don't see the results they were "promised". Depending on how the company pays, you'll see chargebacks...

    Hope that helps
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  • Profile picture of the author mattjay
    If you are doing everything above board, you shouldn't receive any chargebacks. I ran into a situation with fraudulent affiliates selling my things which turned into chargebacks, however before that, with 5 years on paypal, not one chargeback. Refunds? Yes, if you sell ANYTHING in the IM /MMO niche, you're going to get refund requests, a lot of them being very ridiculous. But chargebacks? Should keep that very very low if everything is done right
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    • Profile picture of the author Bruce NewMedia
      I was doing everything above board and last year received 2 chargebacks, so I would have to disagree with you.

      If you sell a lot of products, like say 9,000 or 10,000 you will likely get some chargebacks...at least that's what I've found.
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      Originally Posted by mattjay View Post

      If you are doing everything above board, you shouldn't receive any chargebacks. I ran into a situation with fraudulent affiliates selling my things which turned into chargebacks, however before that, with 5 years on paypal, not one chargeback. Refunds? Yes, if you sell ANYTHING in the IM /MMO niche, you're going to get refund requests, a lot of them being very ridiculous. But chargebacks? Should keep that very very low if everything is done right
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    • Profile picture of the author JessicaLee
      Originally Posted by mattjay View Post

      If you are doing everything above board, you shouldn't receive any chargebacks.
      Ha! That is a joke, right?! Even with the strictest fraud detection practices in place, it is impossible to catch all the criminal out there. Unauthorized purchases will happen. I've read that statistically speaking, the more money you earn the more of a target you become for fraud.

      Not only that, but friendly fraud is on the rise too.

      But to answer your original question, chargebacks really need to be less than 1%. If they get too high, your processor will slap you with a huge fine. If they go hire still, your account will be terminated - and you will have a VERY difficult time getting another.
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      • Profile picture of the author Lance K
        If you have more than 1% chargebacks, you have no one to blame but yourself. There's a flaw somewhere in your system.
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  • Profile picture of the author datingworld
    less than 1% is acceptable but when it goes more than 1%, then it is worrying.
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  • Profile picture of the author Dan Grossman
    Nobody successful has a higher chargeback rate than 1%. This is guaranteed. Visa and MasterCard's operating regulations don't allow processors to continue to stay in business if they can't keep their rates below 1%, which means they can't allow the high volume merchants they underwrite to go above 1% either.

    If you sell $300/month through a 3rd-party aggregator like PayPal, and get 5% back in chargebacks, it might not have immediate repercussions. With so little actual money moving, PayPal can count on other more reputable merchants to balance out the overall chargeback rate.

    If you're selling $50,000+/month in product and have a 2% chargeback rate, you would be cut off from accepting Visa or MasterCard after the second month that happened.

    If you actually do something shady and your chargeback rate is high, combined with high transaction volume, you'll not only be cut off but have your business added to TMF and MATCH. The "Terminated Merchant File" and "Merchant Alert To Control High-Risk" lists are lifelong blacklists for the owners of businesses -- the individual social security number of each principal of the business get added. Every merchant account provider and Visa/MC member bank checks new applications against these lists. They won't allow you to accept credit cards again, even if you dissolve the business and start another.

    The moral of the story: figure out how to keep your rate below 1% or you won't be in business when you grow. If you haven't figured it out before you start moving lots of money, you'll end your ability to run your own business the rest of your life. Back to working for a boss!
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  • Profile picture of the author WillR
    You will get the odd chargeback here and there. Some customers just don't want to talk to you and will run to their credit card company to get a refund -- because they know what they are doing is wrong.

    I've had maybe 3-4 out of 20,000+ transactions.
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