Accidental Chargeback Costs Namecheap Customer $200

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Accidental Chargeback Costs Namecheap Customer $200

Accidental chargeback costs Namecheap Customer $200. Think twice before making a chargeback on your credit card for hosting services.

We came across an interesting forum thread today about how an accidental chargeback of just $10.87 for a domain name resulted in the cancellation of their Namecheap account, with a fee of $200 required to reinstate.

For those who are unaware of what a chargeback is, it is essentially the return of funds after a credit card holder contacts their credit card company to initiate a refund for a purchase made on their credit card. 

The problem with chargebacks is that not only will the company have to issue the refund, but they (in this case Namecheap) will be charged an admin. fee of anywhere between $25 and $100.  

This particular thread caught our attention as the $200 fee does seem a little excessive, or at least surprisingly high. User protech9 stated that the chargeback occurred because:

I used a clients cc with his permission. He did not listen and after receiving his cc statement instead of calling me he retracted the charge, I have contacted him and he is also trying to help me resolve. If anyone has specific steps it would be helpful.

The problem seems to be more exacerbated by the fact that Protech9 is having problems trying to pay the $200 fee.  Reading in between the lines, it would seem someone messed up, and Protech9 is just trying to get the issue resolved to avoid more embarrassment in front of his client.  Understandable.  However, from Namecheap's view, they may see it that someone used someone else's credit card in fraudulent activity.

If a business reaches a sufficiently high number of chargebacks, they can lose the ability to process credit card payments altogether. So their $200 fee is like for (1) paying the chargeback fees charged by their bank and (2) the risk and inconvenience of dealing with all this. Essentially, if a business has a high number of chargebacks, they can lose the ability to process credit card payments.  The $200 fee is " like for (1) paying the chargeback fees charged by their bank and (2) the risk and inconvenience of dealing with all this."

There is a little more information on this in the infographic at the end of this article, which includes significant penalties for companies that have chargebacks over a certain fresh-hold.  It certainly is in the company's interest to take a hard line.

Is $200 Chargeback Fee Standard?

We checked the terms and conditions on a few of our top recommended hosting providers to see what their costs would be in a similar situation:

  • SiteGround's terms and conditions do not specify an exact fee, but they did say that " we will charge you an investigation and processing fee. This fee compensates us for the investigation your credit card issuer requires us to conduct in order to demonstrate our right to payment. "
  • Hostnine's terms and conditions quite helpfully specify a $50 chargeback fee, which we think is pretty reasonable.
  • Arvixe's terms and conditions do not give an exact fee, but instead, give themselves some leeway, by specifying that it will be between $50 and $150 if the account requires to be handed over to collections.  Furthermore, if the account was canceled and needs restoring a restoration fee of $25 will apply.  There will also be a chargeback fee of just $25.

As you can see from these three examples, there is a wide approach to chargebacks.  Arvixe helpfully indicated costs of recovering outstanding sums, but the actual chargeback fee is just $25.  SiteGround prefers to stay silent on the exact cost, but we suspect it will be a bit higher than Hostnine or Arvixe as the company is not US based.

Final Thoughts

Whenever you buy hosting it is always worth checking the terms and conditions, and making a note of things like usage restrictions, cancellation policies, and charges.  We also recommend that before doing a chargeback you reach out to your host to discuss the matter first, and carefully check the terms to see if your chargeback is justified.  In many cases, it won't be, and just open you up to further costs down the line.

Chargeback Infographic

We will leave you with this rather cool infographic via Chargebacks.com, which gives a more detailed look at the implications for both sides of a chargeback:

customer_vs_merchant_what_is_a_chargeback_infographic

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