Best Practices for Managing Refunds and Chargebacks
As COVID-19 causes new restrictions to be placed worldwide, many businesses have been impacted for the coming weeks and months.
Guests are calling off their participation in events and clients are backing out of bookings. These uncertain circumstances have also triggered a growing number of refunds and chargebacks, creating tension and even conflict between business owners and customers.
At Wix, we’re working hard to simplify these often complicated processes for your business. In this article, you’ll learn best practices to manage your refunds and chargebacks, and avoid a negative account balance.
01. Respond to refunds quickly
As guests and clients change their plans, business owners are dealing with more cancelations and refunds. Generally, it’s considered a best practice to provide refunds for all canceled services and orders, whether canceled by you or your customer. You can also temporarily suspend your customer's paid plan until your business is back to normal. For full transparency, it’s also a good idea to update your business’ refund policy.
Why should I refund my customers?
Now more than ever, customers are anxious and unsure about what the future holds. Reassure them by quickly responding to their refund request. Better yet—initiate the refund process yourself if you think they should be reimbursed. Then, let your customers know their funds are on the way.
How do I refund my customers?
Refunds don’t happen automatically if you cancel your event or service. Business owners are required to issue each refund individually through their chosen payment provider. As a Wix user, learn how to refund your customers for services and appointments, event tickets and store orders in a few simple steps. When you refund an event ticket for which a service fee was collected, this fee is fully refunded by Wix.
If you choose Wix Payments as your payment provider, there’s no additional fee for issuing refunds. You can also conveniently manage the refund process right from your dashboard. This gives you easy access and full control over your finances, allowing you to respond to customers quickly. Note that when you refund your customers, standard Wix Payments processing fees apply.
Example: In the U.S., a customer pays $100 for a product. 2.9% of this transaction + $0.30 is the processing fee collected by Wix Payments (standard U.S. fee, $3.20). $96.80 is the amount paid to the merchant’s account balance. Like other payment providers, when a merchant begins a refund process, the merchant refunds their customer the full amount paid ($100).
Tip: Show your customers that you value their business and patience by offering a coupon or discount for their next purchase. Give them the best customer experience possible despite current challenges.
Bottom line: If you’re unable to fulfill orders or provide a service, cancel and issue a refund to your customers. By handling refunds as quickly as possible and making sure your customers are satisfied, you’ll reduce the risk of chargebacks.
02. Managing chargebacks
What is a chargeback?
Customers may file a chargeback request against your business. A chargeback is a demand made by a credit card issuer for a merchant to return funds to a customer. This can happen when a customer claims that products or services they paid for weren’t provided by you. Merchants using Wix Payments can view the chargeback reason from their Wix Payments dashboard.
Why are chargebacks bad for business?
Unlike a refund request (where it’s just between you and your customer), a chargeback involves third-party banks and payment network companies like Visa or Mastercard. While chargebacks may happen now and then, it’s important to avoid a high chargeback ratio. The more chargebacks you receive, the more your risk level increases. This can impact your business operations and may lead to your account closing or payments being withheld.
Handle chargebacks with no penalties
Due to recent events, many business owners have faced chargebacks filed against them.
Payment providers customarily charge a penalty per chargeback.
Tip: Follow these best practices for merchants to reduce chargebacks.
Bottom line: A high chargeback ratio can harm your business. Sometimes, it’s best to simply refund the customer.
03. Handling disputes
What should I do if I get a chargeback?
As the merchant, you can either accept a chargeback filed against you or dispute it. When a customer requests a chargeback through the credit card issuer, they usually receive an immediate refund (unless you dispute it). If you accept the chargeback, the funds will remain with your customer.
When can I file a chargeback dispute?
As a rule, if you disagree with the chargeback reason provided by your customer and have proof of the transaction’s validity, you can file a dispute. Wix Payments does not charge fees for disputes. Below are several chargeback scenarios you might experience as a business owner:
Customer has tickets for an event that was canceled.
Customer has tickets for an event that was rescheduled. The customer is unable to attend the event at the rescheduled date.
Customer cancels tickets for an upcoming scheduled event and your business is protected by a clear, non-refundable cancelation policy.
Customer chooses not to attend an event due to personal reasons.
Hotel reservations and booked services
Customer didn’t reach out to you as specified in your booking policy and is a no-show. Merchants in affected areas are discouraged from billing their customers.
How do I file a chargeback dispute?
With Wix Payments, you can file a dispute directly from your Wix Payments dashboard. When filing a dispute, pay attention to the deadline. After this date, the chargeback is final and you’ll no longer be able to dispute it.
You can easily track your chargeback status from your Wix Payments dashboard. If the bank and credit card issuer decide to recognize the transaction as legitimate (meaning you won your dispute), funds will be returned to your Wix Payments account.
Tip: Quickly handle and respond to chargebacks with Wix Payments’ dispute tool. Easily monitor, accept and dispute chargebacks right from your dashboard.
Bottom line: Dispute invalid chargebacks to protect your business, minus the fees.
As you navigate your business through this challenging time, be patient, flexible, resourceful and look to the future.
Remember, you’re facing certain difficulties, but so are your customers. Invest in customer relationships and establish trust now. How you respond will determine whether you gain a loyal customer in the future—or lose one.
We want to help your business run smoothly. Get the personalized solution you need from our team of Wix Payments experts. Reach out to our dedicated Support Team via chat or schedule a call. Ask us anything—we’re here for you.
Payments Marketing Content Lead
Daniella is a jetsetting word wizard who crafts sharp content that helps merchants get paid. Fun facts: she was an army officer, speaks Mandarin and lived in Greenland for 3 years. This may (or may not) explain her penchant for spicy food, weird accents and frosty winters.