Beat Chargebacks: How A Well-Drafted Contract Protects Your Revenue
Picture a typical day for yourself as a self employed coach or course creator. You’ve just wrapped up a successful session with a client, your online course is seeing new enrollments, and you’re feeling on top of the world. Your hard work is paying off, and business is flowing smoothly.
But just as you’re about to celebrate, your phone dings with a notification. Is it another sale?
Nope. Unfortunately it’s the bane of many in your industry - the dreaded chargeback.
In an instant, your heart sinks. That $1,000 course sale you were counting on is gone. Worse, you might also lose the revenue from the coaching package you delivered last month. Suddenly, you’re facing lost income, potential fees, and a tarnished reputation with your payment processor.
It’s an all too common nightmare scenario for many in the online service industry, and it’s one that can feel impossible to navigate.
But here’s the good news—you don’t have to live in fear of chargebacks.
With a well-drafted contract and solid terms and conditions, you can protect your business and your revenue.
But first, let’s break down what a chargeback is and how it can impact your business.
What Is a Chargeback?
A chargeback happens when a customer disputes a charge made on their credit card and requests a refund directly through their bank or card issuer, rather than reaching out to you. This is different from a regular refund, which occurs when a customer asks you, the seller, to reverse a transaction. Chargebacks bypass you completely, and you often only learn about them after the fact when the money is already withdrawn from your account.
Chargebacks are meant to protect consumers from fraud or unauthorized charges, but they can be abused, especially in the coaching, course creation, and freelance industries, where services are often intangible and harder to quantify. A client might claim they didn’t receive the service as described, that they weren’t satisfied, or, in some cases, they might try to keep your course or services for free.
This leaves you holding the short end of the stick—out of money, out of time, and scrambling to figure out what happened.
How Do Chargebacks Work?
When a client disputes a charge, their bank immediately pulls the funds from your account and puts them on hold. You’re notified of the chargeback, and the bank starts an investigation to determine whether the customer’s claim is valid.
You’ll then have to provide documentation to prove that the transaction was legitimate, such as invoices, email communications, contracts or proof that the product or service was delivered. However, even with all the evidence in the world, there’s no guarantee the decision will fall in your favor.
The entire process can take weeks or even months, leaving your revenue tied up. And it’s not just the revenue from the chargeback you lose—many payment processors will hit you with hefty fees (sometimes as much as $25-$50 per chargeback) and may even close your account if you accumulate too many disputes.
For coaches, course creators, and freelancers, this can be financially devastating.
How Chargebacks Negatively Impact Your Business
Chargebacks don’t just hurt your bottom line. They can damage your reputation and disrupt your business operations.
Here’s how:
Lost Revenue:
First and most obviously, you lose the income from the sale. This is especially painful if you’ve already delivered a coaching session, provided materials, or granted access to your course or a similar digital product. You’ve shared your expertise and resources, but you’re not getting paid for it.
Fees & Penalties:
In addition to the lost income, many payment processors charge a fee for each chargeback filed against you. If chargebacks become frequent, you risk higher transaction fees or even losing access to that payment platform altogether.
Reputation Damage:
Frequent chargebacks make you look like a risky business to payment processors. Over time, they may increase your fees, place holds on your account, or stop working with you altogether.
Lost Time:
Fighting chargebacks is time-consuming and stressful. You’re required to gather evidence, communicate with your payment processor, and wait for a decision—all of which distracts you from serving your clients and growing your business.Client Relationships:
Chargebacks can strain your relationships with your clients at a large scale, even when they are resolved in your favor. The trust that once existed between you and potential and current clients may be eroded, making you skeptical of every purchase.
Now that we understand the damage chargebacks can cause, let’s talk about what you can do to strengthen your response to chargebacks and protect your business.
How to Beat Chargebacks with Solid Terms and Conditions
The best way to safeguard your revenue from chargebacks is by having a contract with clear, well-written terms and conditions drafted by a lawyer. A robust contract acts as your shield and defense, setting clear expectations and covering your business from multiple angles. Simply stating "no refunds" is NOT enough.
Here’s why adequate terms & conditions matter:
Sets Clear Expectations Upfront:
Your contract should outline exactly what your client is purchasing. This includes the scope of work, or a comprehensive description of what services or products you’re providing, the delivery timeline, and what’s expected from both parties. When you’ve clearly defined the deliverables and terms, it’s harder for clients to claim they didn’t receive what they paid for, or that you're doing something fraudulent.Explains Refund Policies:
A strong contract will include a detailed refund policy that specifies under what conditions a refund is allowed. Be crystal clear about your terms. Are refunds offered within a certain period? Are refunds awarded depending on completing a certain percentage of the course and then writing a detailed explanation of why it didn't meet their expectations? This transparency and the act of providing a process for a refund, can prevent clients from going straight to their bank for a chargeback, as they’ll understand their options for resolving issues directly with you. Additionally, this set process boosts the ability of your contract or terms & conditions to beat a chargeback on appeal.
Lays Out Payment Terms:
Outline your payment terms to avoid disputes. Explain when payments are due, what happens if a payment is missed, and what your client’s responsibilities are. Including clauses about late fees or payment plans can prevent misunderstandings that lead to chargebacks.Secures Service Completion Acknowledgment:
In some industries, especially coaching, it’s wise to ask clients to sign off that services were completed satisfactorily. Having documentation that a client agreed they received what they paid for can help you win a chargeback dispute. Specifies How to Resolve Disputes:
A Dispute Resolution clause can be found in most contracts but should be drafted correctly for your sale of digital downloads or services. Specifically, your dispute resolution clause should outline a process of how disputes should be handled, starting off with direct negotiations of settlement among the parties. This limits a client’s ability to initiate a chargeback, as they’ve already agreed to your preferred dispute resolution method.Clarifies Digital Product and Course Access:
For course creators, it’s important to have clear terms around access to digital content. Specify if access is lifetime or limited, and clarify if once the course has been accessed, refunds are no longer available. This can help you avoid clients taking the course and then filing a chargeback.Includes Chargeback Clause:
Include a clause that explicitly states that by agreeing to the contract, the client agrees to contact you first to resolve any disputes before initiating a chargeback. While this may not be 100% foolproof, it gives you an extra layer of protection and evidence to beat chargebacks when challenging them.
Chargebacks can feel like a punch to the gut for coaches, course creators, and freelancers. They drain your revenue, tarnish your reputation, and cause unnecessary stress. But by having a solid contract with clear terms and conditions, you can safeguard your business from the financial damage chargebacks bring.
Now you know what chargebacks are, how they work, how they can damage your business, and most importantly, how to protect yourself by drafting a strong contract.
Protect Your Business with a Solid Agreement
The bottom line? Don’t wait for a chargeback or dispute to happen before you take action. Taking proactive steps now can save you from costly and stressful situations later.
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Don’t let chargebacks kill your revenue—be proactive and protect your business with a rock-solid contract.
*Disclaimer: The above information is for general educational purposes only. Nothing in this blog article should be taken as legal advice. Reading this article does not form an attorney-client relationship with us. An attorney-client relationship is formed through a signed engagement agreement. If you would like further information or are seeking legal advice, we recommend reaching out to a lawyer you trust.