How to Build a Cancel Flow that Minimizes Chargebacks

Customers often initiate chargebacks out of frustration with unexpected subscription terms or difficulty in cancelling their subscriptions. Here are several reasons this happens.

How to Build a Cancel Flow that Minimizes Chargebacks

Understanding Chargebacks

A chargeback is the forced refund of a purchase. The purchase may be for anything: goods, services, or subscriptions.

With a chargeback, your customer disputes a transaction with the bank instead of working it out with you, the merchant. The bank "charges back" the purchase, taking back your money, and begins investigating the matter.

If you can prove your transaction was valid, the chargeback can be reversed, and you’ll recoup the payment. However, chargebacks will typically still incur additional fees and penalties, for example through the Visa Fraud Monitoring Program (VFMP) or Visa Dispute Monitoring Program? (VDMP). So, even if you win the case, chargebacks can be costly. 

For example, Stripe charges $15 or £20 per chargeback regardless of the outcome. Visa doesn’t publish a schedule but typically charges between $10 and $50 per chargeback. Bank of America charges $25 to $50 for each dispute. But these fees also vary by bank and merchant. It’s important to read your merchant agreement for the final word on your specific charges. Yours may be higher or lower than the average.

Fees aren’t the only damage that can result from chargebacks. You also have to keep an eye on the all important chargeback ratio. The chargeback ratio is the number of chargebacks you get compared to your total transactions. The card networks (Visa, Mastercard, AMEX, Discover, etc.) calculate and closely monitor this ratio. 

If you go over a certain threshold—typically around a 1% chargeback ratio—you are rated as having excessive chargebacks, and you are put on notice. If your chargeback ratio doesn’t go down quickly, you are in danger of being kicked off of payment provider platforms, like Stripe. Additional penalties are assessed monthly and you can even lose the ability to accept payments from charge and debit cards. 

This is all to say, it’s far better to avoid chargebacks in the first place rather than lose revenue and reputation with the card networks. Let’s talk about how to mitigate chargebacks, particularly concerning subscriptions.

Why Customers Resort to Chargebacks Instead of Cancelling

Customers often initiate chargebacks out of frustration with unexpected subscription terms or difficulty in cancelling their subscriptions. Here are several reasons this happens.

Complex Cancellation Process

Hidden or otherwise onerous cancellation processes lead to unhappy customers that will eagerly resort to chargebacks. Subscription cancellation should always be a simple and straightforward process for your customers. Unnecessary complications that fall into dark patterns are poor practice that won’t pay off in the long run.

Unnecessarily complex cancellation processes include patterns like multi-page cancelling process, lengthy forms, or forcing customers to call during set hours.

In March of 2023, The US Federal Trade Commission proposed the “Click to Cancel” provision. This rule requires sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. While not yet formally adopted, merchants are beginning to adhere to this policy, as it looks likely to be enforced soon.

Avoiding these dark patterns will limit chargebacks and also leave customers with a positive sentiment should they want to return later.

Unawareness of Subscription Renewals

Given the world of subscriptions we all live in, most people don’t remember the date their individual subscriptions are set to renew. Making a point to notify your customers of upcoming renewals is wise, especially when it comes to annual subscriptions. It helps eliminate chargebacks and keeps your customers happy.

A heads-up of an impending renewal also allows you to use a customer-friendly cancel flow, allowing for a consideration to stay with you instead of cancelling.

We’ll talk more about cancel flows in a bit.

Lack of Clarity in Subscription Terms

From the outset, you must make it clear that your customer is agreeing to recurring charges. Any lack of transparency here can and will lead to disputes and chargebacks. Common pitfalls include free trials that will automatically upgrade to paid subscriptions, or subscriptions with a heavy first year discount that disappears before year two.

Difficulty in Contacting Customer Service

Some customers try to resolve their issues through your customer service. But if reaching customer service is difficult, or they don’t hear back in a reasonable amount of time, they may choose a dispute as a quick fix. This often ends up as a chargeback that you could have prevented.

Key Features of an Effective Cancel Flow

A cancel flow, particularly in subscription-based businesses, should serve two key purposes. First, is identifying and understanding why a customer is considering cancelling their subscription. Second, it should offer alternatives to cancellation with relevant offers.

Make Relevant Offers

Tailoring offers to retain customers based on usage patterns and feedback can significantly reduce churn rates. 

For example, a customer who cancels their subscription one month after joining is usually cancelling for a very different reason than a customer who has already been subscribed for years. Similarly, enterprise customers will have very different reasons for moving on compared to value-priced customers.

Finding the offer that best resonates with each customer is the difference between an immediately churned customer and someone who stays subscribed for years to come. Churnkey's Cancel Flows are designed to help you find these offers of maximum resonance. We combine billing data and data about customer product usage, making it possible to create a personalized experience and offer for each customer.

Easy Navigation

Churn reduction through obfuscation should never be an option. Don’t ever intentionally confuse your customers. Ensure that the navigation through your cancel flow is clear and simple.

A straightforward step-by-step route through the process guides your customers in the direction they should go. Making cancellations easy keeps them happy, and they may decide to return someday.

Transparency and Ethical Practices

Avoid using dark patterns that trick customers into staying subscribed.

Clear and honest communication about subscription terms, plus a quick and easy-to-navigate cancellation process, reinforce your commitment to ethical practices and respect for the customer.


Your cancel flow should personalize alternative offers, like suggesting a downgrade to a cheaper plan based on that customer’s usage patterns.

This approach makes the customer feel valued and understood. It increases your chances of keeping them as customers by directly addressing their unique needs and concerns.

Beyond the Cancel Flow

Prevent chargebacks with comprehensive business strategies. Embed these strategies into your processes and communications from start to finish.

Clarity is crucial in all your communications. If your customers can’t understand the terms they agree to, they may dispute the transaction after it's over. You end up with a chargeback.

Clear Billing Terms

Transparency, especially in billing policies, goes a long way towards reducing or preventing chargebacks.

Make sure your billing terms are clear and understandable in all your communications and in a prominent location on your website.

Proactive Communication

You build trust and confidence with your customers by providing clear and helpful communication. Sending email reminders before a subscription renewal is more than just polite. It's good business, which reduces your number of chargebacks.

A Generous and Proactive Refund Policy

An easy-to-find and simple-to-use refund policy reduces chargebacks before they happen Often, the fact that your refund policy is readily available gives the customer faith that there’s no need to use it. Churnkey will automatically detect angry customers who are asking for refunds, and can send notifications directly to your Slack channel.

Automating Chargeback Prevention

Online businesses receive many transactions in a short amount of time.

Monitoring potential chargeback situations manually is impossible, and so is doing anything about them in real-time. is an automated chargeback prevention service that reduces your chargebacks by 99% through 24/7 transaction monitoring. 

When a potential chargeback pattern is recognised, you are alerted with all the information you need to take the most effective action. For instance, you can choose to refund the customer’s purchase automatically. The system will process the refund for you. All you do is click to authorize it. ChargebackStop enables you to stay below the excessive chargeback ratio levels set by the card networks.

For more information and to book a free demo of the ChargebackStop platform, please visit the ChargebackStop website.