"If you're selling software, there's no reason you should ever have a chargeback happen against you. Just make sure your policy is to refund anybody for any reason at any time. I remember reading a JoelOnSoftware article where he talked about running 4 years straight with zero chargebacks using a policy like that."

This is a fairy story.

We have a no questions asked 60 day full refund policy. We have at least one chargeback a week due to stolen credit cards. We, of course, don't have any reason to fight them over it, so we just accept the chargeback when that happens. But, we definitely get chargebacks.

I do occasionally get phone calls from people who don't know who we are. I answer their questions, and if the description doesn't ring a bell (sometimes they'll say, "Oh, I need to ask our system administrator if he bought that." and I never hear from them again), I process a refund immediately.

But, software companies definitely get chargebacks. There's no way to completely avoid fraud without refusing lots of legitimate customers (AVS, for instance, doesn't work for most non-US card holders, and we do half of our business outside the US, so we can't reject orders with an AVS mismatch).

I've had 4000 sales now (crikey), and precisely one chargeback. You can make your own guesses about FC's volume over the interval at issue, but I find "no chargebacks in four years" entirely credible.

This may be an aspect of the audience more than the product category (software). Your audience is teachers, correct?

My audience is highly technical, and the particular segment is rife with piracy. Even though our product is 95+% Open Source (and so there is a free version that people can use to do nearly everything the commercial version does), we still have people who use stolen credit cards to order our products.

And, it may also be a factor of product pricing. Your products are under $100, right? Ours run from $149-$999.

Sounds like our sales volume is actually about the same as yours. Looking over the actual numbers, chargebacks are less than my initial estimate. More like once every 2-3 weeks, and sometimes we'll go a whole month or two between; but some months we'll see a rash of them. It averages out to a couple a month.

But, it's definitely something we deal with regularly. Are you doing anything in particular to prevent fraudulent orders, or is it just the nature of your customer base that it simply doesn't use stolen credit cards to buy software?

Also, how much of your business is international? We've found that 95% of our fraudulent orders are from overseas (but 50% of our legitimate orders are also from overseas, so we're not willing to make it difficult for those folks to buy from us).

Here's a link to the fairy story in question:

http://www.joelonsoftware.com/articles/customerservice.html

This is not a customer support issue. It's a fraud management issue. No amount of fanatical customer support can stop people from using stolen credit cards to order your software. It is a digital good, delivered instantly over the Internet.

Most people, when noticing their card has been stolen, will simply request chargebacks of every unrecognized item on their bill. The vendor never hears about it, and has no idea it has happened, until after the chargeback has taken place.

Thanks for the posting the link. Fog Creek is fanatical about customer service and it shows in their chargeback rate. As alluded to, 0% is entirely possible, and it comes from being fanatical about offering refunds.

We actually can back that up - Fog Creek is a FeeFighters customer!

You're either very lucky, haven't actually sold software/intangibles at volume before, or whatever you were selling had no value to the mass market. Other than those circumstances, you WILL be targeted by fraudsters, using stolen credit cards to purchase your wares. It's near impossible to detect them reliably up front, which is why most of PayPal's competitors went out of business a decade ago. The chargebacks are from fraud, not unhappy customers, and your refund policy is irrelevant to reducing them.

It's all about where the customer enters the process. If they are using the software and say, "Hey I think this sucks" then they will likely go to your site and request a refund. If, however, they look at their credit card statement and think, "I didn't like that program, I meant to cancel it" or "Hey I don't remember buying anything from ABC Software" (because the name of your product is "Really Cool Thing Pro") then they are likely to find it easier to dispute the charge.

That's one of the "broken process" things I had in mind when I wrote the above. The text that appears on your customers' credit card statement should clearly identify:

  - what they actually bought
  - how to contact you

The quickest way is to have your domain name appear there, complete with .com so they know they can simply type it into a browser and get to the bottom of things. Of course, on that page you'll need to have a link they can use to figure out what they've bought from you and get a refund if necessary.

There are a dozen little things you can do to reinforce the message that "we don't want your money unless you're amazingly happy". If your customer wants his money back, he'll get it one way or another. If you make it easy to simply reverse the transaction through you, they won't ever need to get their bank involved.

We're not fighting with customers, we fight with banks, and it's not like it's a daily occurrence. And perhaps it's because we don't sell software. You might want to get that "contempt prior to investigation" thing you have checked out, as you have no idea what our return policy is, or what our customer base is like.

Anyway, I am just sharing about the differing experiences we have had with PayPal and with our merchant bank.

I didn't mean any hostility in my post. Sorry if it came across that way.

But regardless of who you're technically fighting with, it's still a matter of you trying to keep money from people who want it back. I can't come up with very many reasons you, as a business, would ever want to do that. All you'll accomplish is making those customers angry enough to tell the world how much they dislike your business, and they'll still get their money back through the chargeback.

Seems like a losing proposition.

Or consider a service. Suppose you're ODesk or eLance--do you offer a money back guarantee months later after you've paid a contractor for their work?