Picture this; you log into your affiliate reporting dashboard & notice that you’ve earned a handsome commission of a few hundred dollars.
Amazing, right?
But upon logging back in a few days later you realize the commission has been revoked & the reason is because it’s been subject to a commission chargeback.
😲
You scream, you cry and you run around waving your hands in the air.
Then, when you finally calm down you wonder, what is a commission chargeback, anyway? And is there anything you can do to prevent these types of chargebacks from happening again in the future?
Well, the good news is that you’ve landed in exactly the right place to find out.
In this blog post, I’m going to explain everything there is to know about affiliate program chargebacks. So let’s dive straight in & get to it.
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Affiliate Program Chargeback Explained
A chargeback occurs when a consumer complains to their card issuer & claims that they were defrauded.
It’s pretty serious & if somebody does it, then gets investigated & it turns out that they were lying, they can actually get prosecuted for fraud.
And there are typically 4 main reasons as to why people file chargebacks, which are:
- They were genuinely defrauded (had their card stolen, etc)
- They got major purchase regret & desperately wanted their money back
- They didn’t like what they received
- They were trying to scam the seller (and get both the product AND their money back)
Whatever their reason, chargebacks suck all the same.
That’s because when somebody files for a chargeback, the merchant not only claws the money back from the seller but they also typically hit them with a hefty fee, too.
So, a chargeback can leave a seller quite out of pocket.
And most merchants also imply policies through which they will close down sellers’ accounts if they receive too many chargebacks in a certain period of time.
Not good!
But chargebacks aren’t just bad for sellers. They’re bad for affiliates, too.
The reason for that is that when the sale gets reversed, so does your commission. 😢
And some affiliate programs may even pass the additional charge onto you as well.
This won’t mean that you’ll ever have to pay money out of your own pocket, but it could mean that you may have to make additional sales just to simply bring yourself out of the negative before being able to actually get paid again.
That exact thing happened to me several years ago.
I was expecting a handsome commission payout but then a chargeback on a high-ticket item ended up putting my account balance into the negative.
This meant that not only did I lose the payout, but I also had to make several sales just to clear myself out of the negative before being able to “earn” again.
Pretty sad times.
Thankfully, though, it’s rare that affiliate programs pass the fees onto affiliates. Most programs just offer a “3 strikes & you’re out” policy.
Basically, that just means that if you get too many chargebacks in a certain period of time then they’ll kick you out of their program.
Obviously, that’s still not ideal, but it beats getting “charged” fees each time it happens.
Why Are Chargebacks Bad?
Chargebacks are bad for a number of reasons. The obvious ones are the ones that I just discussed above; the possibility of facing fees or getting kicked out of your affiliate program.
But alongside that, there are several other problems caused by chargebacks.
You see, if a vendor faces a high volume of chargebacks from customers, then their merchant account will typically begin to charge them higher fees per transaction.
This may not initially seem like much of an issue to you, as an affiliate, but most companies will then make up for these increased fees by lowering the commission rates of their affiliate program.
And in an effort to protect themselves against future chargebacks & affiliate fraud, many companies will create pools of funds known as “reserves”.
This is quite common in the world of affiliate marketing & it involves companies putting a percentage of your commissions (e.g. 10%) into a hold which gets released weeks or months from the initial transaction date.
This gives the vendor a bit of a safety net so that they have a pool of reserve funds available to cover any chargebacks that may arise but it means that for affiliates, there can be a delay in getting some of their money.
You can see an example of one such reserve pool below:
The TLDR here is that nothing good comes of chargebacks – they’re bad news and you want to make sure that you avoid them at all costs.
How To Prevent Chargebacks In Affiliate Marketing
Going back to what I said earlier in this post, there are 4 main reasons people file chargebacks & those are:
- They were genuinely defrauded (had their card stolen, etc)
- They got major purchase regret & desperately wanted their money back
- They didn’t like what they received
- They were trying to scam the seller (and get both the product AND their money back)
So, to prevent chargebacks, you first want to make sure that you’re being as upfront & honest as possible about whatever it is you’re promoting.
You also want to make it really easy for people to get a refund.
Even though that may sound counterproductive, a refund is always better than a chargeback… And if you’re promoting something of value, you shouldn’t really be concerned about getting too many refunds.
If you are concerned about refunds, then that raises questions about the quality of the product/service you’re promoting.
Alongside that, though, you need to take a look at your niche as a whole. Some niches have massively higher chargeback rates than others due to purchase regret being much more prevalent.
For example, the gambling niche typically has insanely high chargeback rates due to people losing their money and then greatly regretting it & trying to get it back via a chargeback.
Similarly, selling feet pics is going to see much higher chargeback rates than selling a SaaS product. It’s just the nature of the product.
But alongside those, there is also the possibility that you are receiving chargebacks due to people genuinely trying to commit fraud.
Certain countries (such as Nigeria, Egypt, etc) have extremely high chargeback rates as many citizens there make purchases online, receive the product & then file a chargeback to get their money back as well.
So, what can you do in this situation? Well, the answer is to generate as high-quality traffic as you possibly can & avoid any low-quality sources.
It’s not nice to exclude certain countries but sometimes it just has to be done.
The Bottom Line
Affiliate program chargebacks are things of nightmares. It’s a horrible feeling seeing your commissions taken away from you, especially if they’re huge high-ticket ones.
However, I hope that this guide to commission chargebacks has helped you better understand what they are & most importantly, how they can be avoided.
If you’d like to learn more about affiliate marketing & how you can get started then be sure to sign up for our free training course before you leave.
And if you happen to have any further questions or comments, don’t hesitate to leave them below.
