Digital Download Refunds

Thanks Janet. I will be selling PSD files. But i've heard stories of people being able to chargeback while keeping goods, which is stealing in my books. And paypal protect buyers more than sellers! As these items are unique designs, i would add a clause that copyrights are automatically handed over on reciept of goods. If they chargeback, then they relinquish copyrights and are liable to legal proceedings if they use my work. But its a complicated area, and is i'd be selling to UK and USA and as a sole trader, not too sure. Thanks again.

Good info here. As far as refunds go, it's part of the downlaod game. you are going to have folks who downlaod and refund. There are people that do that all day long to get free stuff.

When I first started out, I used to fight them all as long as I had the download access recorded (E-Junkie records the IP and time of the download).

I would always win, but about two years ago I got a notice from Paypal. It stated that my "complaint rate" was at 2.8% (higher than their accepted 2.5%). This was because I wasn't making that many sales at the time (about 100-110 per month), and I had 3 disputes which escalated into claims. They advised me to "adjust" my refund policy to avoid account suspension.

Evidently, a dispute does not count as a "complaint" unless it escalates to a claim. So, if you just refund the money, you have nothing to worry about. You could make 100 sales and issue 50 refunds and there is no problem as long as they don't escalate to claims. This is another safety net that Paypal has in place to protect the buyer.

The more business you do, the more you'll see Paypal is all about the buyer.

As far as chargebacks, in my experience, that's almost always a win for the buyer. I don't even bother to fight those.

In fact, I don't fight any of them anymore. If someone wants a refund, I just give it and chalk it up to being part of the biz. I advise you to do the same. And don't let it get to you. It's not really a reflection on your product, it's all about unscrupulous buyers most of the time.

1. No. Paypal automatically fights chargebacks as a matter of course. It has nothing to do with the dispute system. I have won three out of four (or I should say paypal did).

2. Correct. But most people that chargeback never request a refund. They just charge back.

Guys ... with digital downloads the ONLY WAY TO DO BUSINESS is to simply grant refunds to anyone who requests them, within a reasonable time period. For example with PayPal you can issue a refund up to 60 days. After that you can send them money by PayPal.

60 days is reasonable.

If you sell a good product your refund request rate will be low. Some people will steal from you by requesting a refund even though they like your product. THAT IS LIFE. Just deal with it.

The last thing you need is someone accusing you of being a scammer, so just refund people if they ask. Don't sweat it.

Every expert in the business will tell you the same.

So do I understand this correctly that when there's a chargeback (i.e., stolen card), you can get it eliminated by simply refunding the money? Or telling PayPal to refund it? Is that an effective way to protect yourself from PayPal trouble?

I have been doing this for many years and I have been able to avoid charge backs and scammers. It's a process that tends to piss off some people because you remove their right to rip you off.

Here's how it works:
Digital products are not a physical item, so they are easily disputed, you can have all the proof you want of a person receiving their product via download, it don't matter they rule against you in most cases.

So the only real way to protect yourself against these crooks is to send them their product on CD, which I do. It cost me about 2 bucks for each Cd that includes the CD the mailer and the postage. Then you have proof they received their product physically, not only that the tracking number or D/C proves it.

I also add a code to the download. This way they can download the product right away as I advertise, but you can not use the product without the code. There is two ways to get the code.
1 Is you receive your CD in the mail.

2 You agree to the digital download terms.
The digital download terms clearly states you agree that you have received the product that you paid for via download.If you do not agree to the digital download terms, you will not receive the unlock code until you have received your physical product being a CD in the U.S. mail.

I have only lost one transaction out of 1,000 since I implemented this policy.My download agreement explains to the customer that the world is not a perfect place, so to protect you and I we have this policy. If you do not agree to these terms, then you will have to wait for your CD to arrive in the mail. I never got 1 complaint.

Also I inform the customer there is no refunds once you download the software or we ship your CD. PayPal thought this was the greatest idea anyone ever came up with. Here's a little added feature.

Shipping international can be complicated tracking unless you use UPS, by using that unlock code on all my products download or CD they have to contact me saying hey, I got me CD I need the unlock code. Now I have proof that they also received their product in the form of a written email.The best part is you can advertise instant download, which they can, but they don't know they can't use the product without the code. So it's a catch 22. I don't like to do this, but I have to because their is a whiner, a thief and someone out there you will never please in every 100 customers. I have ways to deal with them all. Don't let smiling faces fool ya, they're only out ta ______ ya. If you tread each transaction with reservation it is your best defense against dirt bags.

There's a lot of dirt bags out there that have no problem ripping you off. Be creative and always be on your guard.There is nothing worse than a customer doing a charge back and getting your product for free.
You may piss a few people off, but I look at it this way, better them then you.

Here's the bottom line. PayPal will rule in your favor if they received a physical product in the mail. $2.00 is a very small insurance policy against lost payment. This rule does not apply to eBay.
eBay is a joke, and if you sell on there you are asking for problems. Run your own site and your own rules.

The only way you will lose against using PayPal using this policy is, if they go to their credit card company and dispute it. PayPal is a gateway they are not a direct credit card processor, and because they are a third party processing system for credit cards it creates a problem. ( YOU'LL LOSE) 99 percent of the time.

The way you get around that is, you use a credit card processing company like merchant 1 or your bank. They are used to dealing with change backs and you will win every time if you have the proof as outlined above.

Years ago PayPal used to put a notice by the payment saying it was paid via CC and you could accept or reject it. I would always reject it and tell the customer we do not accept credit cards.
Times have changed and they no longer provide that luxury. If you do decide to use a credit card processing company make sure they are not a gate way like PayPal, r you could be jumping from one fire in to the next.

I am done writing my book, I hope you get some good advice out of this.