by selfpublishing.com

What is a Chargeback? What You Need to Know to Protect Your Freelance Business

What is a Chargeback? What You Need to Know to Protect Your Freelance Business

Launching a freelance writing career can be difficult.

If you’re just getting started, there’s a lot to learn. How much should you charge? How do you find clients? When should you go full time?

While these are all major elements of your business, sometimes the smaller details can prove just as challenging — and costly. Read on to learn about one such little-known business obstacle: the chargeback.

I learned about chargebacks the hard way, but you shouldn’t have to. Here’s what you need to know.

One freelancer’s introduction to chargebacks

Dear Freelance Guru,

I just recently landed a new client. WooHoo! He hired me to write five articles for a grand total of $125. I finished the assignment in the allotted time frame and emailed him the articles. He acknowledged the submission, thanked me for my efforts and paid the full amount with his credit card.

Today, I got some bad news. The client filed a chargeback! The $125 has been removed from my account and I’ve been charged a $20 fee! Before today, I didn’t even know what a chargeback was!

What irks me the most is that he has my content on his site. The chargeback obviously wasn’t filed because of poor quality. Not only did he thank me for my efforts, he posted the articles. If they were good enough to post, they were good enough to pay for!

Help! What can I do?!

Sincerely,

Financially Distressed

Dear Financially Distressed,

Welcome to the world of business, my friend. Life isn’t fair, and there will always be people out there who try to take advantage of any situation. I’m sorry you had to learn that lesson.

What is a chargeback?

Even now that you have experienced a chargeback, there is a good chance you don’t know everything there is to know about them. Let’s take a moment to get caught up on essentials. To learn more about the technicalities of the chargeback process, read this. If you choose to continue life as a freelancer, you’ll need to know the specifics.

A chargeback is basically a credit card refund, invented to protect cardholders in case something goes amiss with their transaction. All a cardholder has to do is file a chargeback and their funds will be returned. Meanwhile, you’re left footing the bill for the administrative fees and are out the profits.

If you sustain in a certain number of chargebacks in a given period of time, usually a month, you could lose your processor (the bank willing to process your credit card transactions). If you lose your account with the bank, it will be difficult — or even impossible — to get another.

This also holds true for PayPal, which many entry-level freelancers use. Well, PayPal is a merchant processor and susceptible to chargebacks too.

What does a chargeback mean for you?

While the cardholder’s assets are covered, the merchant (you!) is woefully unprotected. Any time a business owner (or freelancer) experiences a chargeback, he or she bears the burden of proof. To fight the chargeback and reclaim your funds, you must have written proof that the transaction was authorized and the goods or services were successfully transferred to the cardholder.

Now, in your situation, there is some good news. You have an email from the client saying the services were rendered in a satisfactory way. That will help you, should you choose to fight the chargeback. Any other documentation you have regarding the writing assignment should help too.

Because you are a freelance writer and your “services” are already out there for the world to see, you have an advantage that few other business owners have. If you are unable to successfully reverse the chargeback, you can at least make the website owner “pay” for his poor behavior.

Technically, you own the copyright for those articles until the website owner pays for them. If he hasn’t paid you and is still using your content, he is in violation of copyright laws.

[bctt tweet=”If a client hasn’t paid and is using your content, he is violating copyright laws.”]

You can do a search and find his website’s host. Most hosts have a page dedicated to DMCA (Digital Millennium Copyright Act). After answering a few simple questions, the host company will go to bat for you. If the site owner doesn’t pay you for the articles or take them down in the specified time frame, his site could be shut down.

How can you protect yourself from chargebacks?

Dealing with the situation at hand is only part of the battle; what you really need to worry about is taking care of your business in the long run.

Chargebacks are traditionally filed for one of two reasons: fraud (unauthorized transactions) or poor customer service.

Fraud is difficult to detect and prevent, but these steps are not impossible to implement. Here’s how to reduce the risk of fraudulent chargebacks when dealing with new clients:

  • Verify the client is a real person, operating a valid business or website. For example, if you accept a job via Craigslist, consider insisting on a telephone or Skype conversation rather than communicating solely through email. If you are working for a local brick-and-mortar business, drop by during business hours to check the place out.
  • Get everything in writing. Draw up a contract and have both parties review and agree to the terms. Make sure you and the client both have a signed copy.
  • Consider an extra precaution. Some writers request a copy of a photo ID and the front of the credit card. They compare this to the signature on the contract.

While providing good client/customer service can help you with referrals and repeat business, it can also help protect you from potential chargebacks. While you probably use these strategies already, knowing you’re safeguarding your earnings is a little extra incentive to stay on top of everything.

  • Abide by all deadlines. If there’s a chance you’ll miss one, let the client know in advance and give as much warning as possible.
  • Don’t take on more projects than you can handle. When you spread yourself too thin, the quality of your writing will suffer. When you submit sub-par content, you open yourself up to chargebacks based on quality issues.
  • Reply to emails and calls promptly.
  • Follow all writing and submission guidelines to a T.
  • Send a detailed invoice as soon as the work has been completed.

Again, I’m sorry you had to experience this unfortunate financial setback. Hopefully, you can learn from the process and take the necessary steps to protect yourself in the future.

Sincerely,

Freelancing Guru

Have you ever experienced a chargeback? What did you do?

Filed Under: Freelancing

14 comments

  • Maritza Diaz says:

    Such great advice! So important for writers to protect their work. Will share this post.

  • Hi Jessica. Thanks for this article. I did not think that a credit provider would allow a client get away with this type of fraud, but I guess the hirer can always say they were not happy with the service. It is an important warning to freelancers. Thank you. I will share your wisdom with credit to you.

    Best wishes.

    John Cosstick

    • Jessica says:

      Oh, you can’t even begin to imagine the amount of fraud associated with chargebacks. It is so hard for the merchant/freelancer to disprove the fraud (since most don’t have the preventative practices in place to supply written documentation), so many sketchy people get away with way too much sketchy behavior!

      • Hi Jessica.

        You are right. If you are operating internationally as a freelancer there is a very good case for using an employment platform such as Elance or Freelancer, for example. You then have an umpire in case of disputes! There is no shortage of sketchy behavior on the internet. Cyber fraud is a major industry.

        It was an important article.

        Best wishes.

        John Cosstick

  • Barb Johnson says:

    Thank you so much for this article. I’m not totally new to freelancing, but never heard of chargebacks.

    This information is so important. You have really opened my eyes to some vital processes I will have to put in place.

    Thank you again!

    Barb

    • Jessica says:

      Not only will chargebacks cause a loss of profits, they will also cause a loss of time–a very valuable resource in our world. Filing chargeback disputes is complex and time consuming. Rather than spending that time on growing your business, you’ll be focusing on fixing mistakes. It is a much better business practice to stay focused on the future, rather than the past. So yes, putting necessary chargeback prevention practices into place is much better than disputing them when they come along.

  • Hassan says:

    I honestly had never heard of chargebacks before this post, probably because I’m new to freelancing.

    I see that protecting yourself from them or from any other unfortunate traps is to make sure you’re thorough and systematic with everything you do right?

    Thanks for the much needed heads up Jessica!

  • Elke Feuer says:

    Wow! Thanks for this article. I’m very new to freelancing and didn’t know about this. At the moment, my client pays me by check and I haven’t had any issues, but this information is good to know when dealing with future clients.

    • Jessica says:

      You’re welcome! I’m glad you could benefit from it. Even in the traditional business world, chargebacks aren’t a widely known topic. Most people don’t know about a chargeback until they’ve experience one themselves. Fortunately, I’ve learned the lesson for all of you–and I don’t want you to follow in my footsteps! 😉

  • Nice post presenting a strategy to protect against chargebacks. I especially like that you point out the copyright infringement if the client is using the content without having been paid. Definitely tweetable.

    I would add that the contract should be specific on the point of copyright ownership. If the job is a “work for hire” then the copyright transfers to the client ONLY UPON PAYMENT IN FULL. Put it in the contract specifically.

    With that language, there is no question that the freelancer still holds the copyright on the content until paid. This will help with the DMCA takedown notice process.

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