This article goes over how to prevent and handle student chargebacks, and also outlines Teachable’s chargeback policy.
A chargeback (also known as a dispute) occurs when a cardholder questions a payment with their card issuer; this differs from a refund, which is a voluntary return of funds from the billing entity. A transaction may be disputed for a variety of reasons by a student, such as unfamiliar or fraudulent charges.
School owners are charged a $15 fee for any chargeback initiated on credit/debit card transactions processed by the Monthly Payment Gateway or Teachable Payments. Teachable also provides school owners the ability to dispute chargebacks on their end, in the case of a misunderstanding or fraud. With this in mind, it’s important to understand how to handle and prevent disputes with your students to minimize any financial loss.
While chargebacks are an unavoidable aspect of taking payments online, a strong prevention strategy is the best way to mitigate chargebacks. We recommend implementing a number of prevention methods, including establishing effective communication and transparency, crafting a clear sales pitch, and adhering to a fair and flexible refund policy.
Establish Effective Communication and Transparency
Your school’s refund policies, course content, and any other aspects of the course experience should be presented clearly on the sales page of your course and reinforced across your school.
For example, if you plan on releasing content over time, this information should be clearly stated on your sales page to avoid confusion. Similarly, once a student has enrolled in your course, you can send them an email containing more information about how the course is structured, along with your refund policy and contact information, for future reference and clarity.
Ensure that your school’s email address is current and that all email inboxes associated with your school are monitored regularly. Oftentimes, if a student doesn’t receive a response from a school owner regarding login or access issues, they may dispute the charge with their bank. Many concerns can be resolved directly with the student if you're responsive to inquiries and transparent about your policies and content from the get-go.
Craft a Clear Sales Pitch
When coming up with a sales pitch for your course, keep in mind how it may be received by prospective buyers. Compelling sales pages are essential for sales conversions, but avoid being ambiguous or unclear in how you present your course.
For example, presenting your course as a “get-rich-quick scheme” or promising dubious results may lead to unrealistic expectations and/or frustrations from your students.
Adhere to a Fair and Flexible Refund Policy
Having an easily understandable refund policy goes a long way; we recommend considering each refund request on a case-by-case basis. If a student wants to file a chargeback, you can preemptively issue a refund, which will effectively prevent the student from disputing the transaction and help you avoid chargeback fees.
Oftentimes, disputes occur due to a lack of communication from both parties, and more often than not, further communication and compromise can lead to a resolution—rather than a long, drawn-out dispute.
Students that file a chargeback are automatically unenrolled from the course they originally purchased. If they purchased a subscription or payment plan, then their active subscription or payment plan will also be automatically canceled.
Teachable will send you email notifications when a chargeback is initiated by a student on payments processed by Teachable Payments or the Monthly Payment Gateway. You will not receive email notifications for chargebacks that are initiated on transactions processed by custom payment gateways (Stripe or PayPal). To view all disputed transactions, navigate to your transaction history.
In some cases, you'll have the option to dispute the student chargeback. The process for disputing a chargeback differs depending on the payment gateway that processed the transaction.
CAUTION: The win rate for chargeback disputes is very low. If a dispute is initiated, we cannot guarantee that you will win the dispute. After a dispute is initiated, it can take credit card companies up to 90 days to render a decision and begin the process of returning the funds to the school owner or student. The best way to handle chargebacks is to take the prevention steps outlined above to decrease the likelihood of student chargebacks.
The Monthly Payment Gateway and Teachable Payments
The email provides a link to the transaction in question so that you can contact and resolve the dispute with the student directly. We recommend reaching out to the student as soon as you receive a chargeback—once a chargeback is issued, the disputer has a limited time to cancel the chargeback.
If you believe a chargeback that you've received is erroneous or unwarranted, or you're unable to come to a resolution with the student, then you have the option of disputing the student chargeback. To do so, fill out the dispute form as soon as possible to begin the dispute process. Stripe will not accept any chargeback disputes submitted more than 7 days after receiving a chargeback.
NOTE: Chargebacks issued on payments processed by the Monthly Payment Gateway or Teachable Payments are subject to a $15 chargeback fee. This fee is deducted from your school’s payout but is returned to the school if the school wins the dispute. You can view chargeback fee deductions in your earnings statements.
Custom Payment Gateways
If you're using custom payment gateways, Teachable will not automatically notify you if a chargeback is filed. Please contact Stripe or PayPal for more information about how to set up chargeback notifications and dispute chargebacks.
Teachable's Excessive Chargeback Policy
If you’re using Teachable Payments or the Monthly Payment Gateway, then Teachable is liable for any chargeback fees associated with a disputed transaction. As such, if a school using our payment gateways has an excessive chargeback rate (> 1%), we will contact the school owner via email requesting that they set up their own custom payment gateways.
A school's chargeback rate is calculated based on the total number of chargebacks and the total number of successfully completed transactions in the month-to-date—which refers to the period from the first day of the month to the current date of the month. For example, if a school has 200 completed sales from May 1st to May 15th and one chargeback in the same time period, then the school's chargeback rate would be 0.5% (1/200).
If the chargeback rate continues to be excessive, and the monetary value of these chargebacks exceeds the value of a school’s payout, then Teachable reserves the right to withhold payments and/or take your school offline. To check your current chargeback rate, go to your school's Dashboard page:
Potential Fraud Warnings
If you're using Teachable Payments or the Monthly Payment Gateway, school owners will be notified by email whenever a transaction has a potential fraud warning. Potential fraud warnings are created when a user claims to their bank that a transaction is fraudulent, and occurs before an official chargeback/dispute is created. According to Stripe—the service Teachable uses to process card transactions—"82% of payments that receive PFWs eventually get disputed".
You can use the 'Potential Fraud' filter in Admin > Sales to see any transaction that has an early fraud warning. Similarly, potential fraud warnings will be indicated as such in an individual transaction's details: