Beating Twitch Chargebacks

Table of Contents

1. What Is a Chargeback on Twitch?
2. Why Do Streamers Get Chargebacks?
3. How Can Twitch Streamers Prevent Chargebacks?
4. How Can Streamers Fight Chargebacks?
5. The Bottom Line on Twitch Chargebacks
6. Can Cardholders Chargeback Twitch Donations?
7. Can Gifted Subs Be Charged Back?
8. What Do Chargebacks Cost Streamers?

Live-streaming has been one of the fastest-growing forms of media over the past decade, despite the fact that its audience is largely limited to the relatively young. While live-streaming was once largely defined by users broadcasting themselves playing video games, there's been tremendous growth in the live broadcasting of other activities. Some streamers record podcasts on-air, while others might simply chat with the audience over a cup of tea.

The largest streaming platform, Twitch, allows streamers to make money through a share of ad revenue and through user subscriptions to their channel. Many streamers also make money through sponsorships and endorsements. However, one of the largest sources of revenue for streamers is direct donations from viewers.

Unfortunately, even a donation is still a payment a customer might come to regret, and when that happens, a chargeback may result. The variety of platforms through which streamers might receive payments or donations from viewers makes understanding and managing chargebacks more difficult, but that doesn't mean they should be ignored. What can Twitch streamers do to protect themselves from chargebacks?

There’s a lot of competition in the streaming world, and while only a select few approach the heights reached by streamers like Ninja, who reportedly received over $20 million to join Microsoft’s Mixer platform, it’s not uncommon for dedicated, professional streamers to pull in thousands of dollars each month.

Make no mistake, they’re working hard to earn that money.

Building an audience and keeping them coming back to your channel on a regular basis takes time, dedication, skill as a broadcast performer, and often a considerable investment in the hardware and software that makes streaming possible.

Just like any other digital entrepreneur, streamers can suffer significant losses from chargebacks, missing out on the tips and donations that are getting clawed back and racking up costly fees as well.

For streamers and other online content providers, the word "chargeback" might be a foreign one. Chargebacks can affect anyone who accepts credit or debit card payments, but they're particularly common in online transactions.

When a viewer watching your stream makes a donation or purchases merchandise, they're almost certainly using a credit or debit card.

Thanks to a pair of laws passed in the U.S. in the 70s when these cards were first becoming widespread, the owner of the card—AKA the cardholder—can contact their bank to dispute a charge on their card and get that charge reversed.

Since most Twitch streamers don't accept debit or credit card payments directly through a merchant account and payment processor, the results of a chargeback will depend on the rules for the platform that handled the payment, such as Twitch or PayPal.

True Fraud

If someone's credit card information or their account credentials were stolen and the thief used them to make a purchase or donation, you'll almost certainly see a chargeback. This is the primary scenario chargebacks were designed for, and these chargebacks can't be fought and reversed.

Unfortunately, it can often be difficult to tell the difference between a genuine victim of fraud and someone who's merely claiming fraud in order to get their money back. Customers in the latter group fall into our next category.

Friendly Fraud

If someone forgets a donation they made and later sees the charge on their account, or finds out a child used their credit card without permission, they may file a chargeback to recover the money, even though these aren't legitimate reasons for a chargeback.

Sometimes fraudsters use chargebacks maliciously, making a purchase and then claiming the charge must have been the result of true fraud. In some cases someone seeking to hurt a streamer might make repeated small donations and then file chargebacks on each of them, leaving the streamer in the red thanks to chargeback fees.

There are a number of other reasons why a viewer might decide to dispute their donation and get a chargeback. In the heat of an exciting moment, they might tip more than they can really afford. That could lead to a chargeback once they take a look at their bank account. The same is true for viewers who might make a big donation when watching a stream while intoxicated.

Many streamers interact with their fans, talking to them on camera or in the stream’s chatroom, which can lead to conflict or drama that could cause a fan to change their mind about donating and try to get their money back.

And of course, the internet being the internet, some people troll streamers by making big donations that they fully intend to charge back later. In one famous example, someone donated over $5,000 to a streamer, only to file a chargeback 6 months later.

Merchant Error

Merchant error chargebacks don't apply to streaming on Twitch directly, but may affect those who sell branded merchandise. A merchant error chargeback occurs when the merchant fails to uphold their end of the sales agreement. That can mean failing to deliver a product or service, delivering a damaged product, or making some error when processing the payment.

How Can Twitch Streamers Prevent Chargebacks?

Tips and donations are a well-established and accepted part of streamer culture, so streamers expect that if they’re keeping their audiences entertained, some of them will want to send some money their way. Thus, it makes sense to make things easy for your generous fans by accepting payments from as many platforms as you can.

While many platforms, including Twitch, sell proprietary digital currencies that can be used to tip streamers without any risk of chargebacks, many streamers still rely on donations from PayPal and other widely-used payment platforms.

PayPal's seller protection doesn't cover donations, which means that streamers will be charged a $20 fee for each donation that turns into a chargeback.

The only way to prevent this entirely is by refusing to accept donations in any form other than Twitch's Bits. Of course, that can also have a negative impact on revenue, since Twitch takes a larger cut than PayPal.

One way to discourage trolls from donating with the intent to file a chargeback is to learn how to fight and win these disputes. If a troll knows they might not get their donation back, they're less likely to try the scam in the first place.

How Can Streamers Fight Chargebacks?

Streamers can fight chargebacks by responding to them in accordance with the procedures of the platform involved and by keeping records that can be presented to prove the legitimacy of the charge.

Since vanishingly few streamers set up a payment gateway to process credit card transactions directly, it’s likely that most chargebacks will go through PayPal and similar platforms.

It’s a good idea to review how the chargeback process works when PayPal is involved. While disputes kept internal to PayPal can be resolved through communication in the PayPal Resolution Center (with PayPal serving as the final arbiter), cardholders who dispute PayPal transactions with their issuing bank end up with PayPal as the middleman, gathering evidence from the seller and presenting their findings to the issuer in a process called representment.

It’s important to note that PayPal has a short deadline for responding to chargebacks: ten days. To fight PayPal chargebacks, you must keep on top of your notifications and respond promptly when chargebacks come to your attention.

Fighting chargebacks (and winning) is all about presenting the right evidence. To beat a chargeback, you have to show that the charge was valid, the cardholder was not misled or defrauded, and that you met your obligations as the receiving party. What kind of evidence should you use when the disputed charge is ostensibly a no-strings-attached donation? This is what we recommend submitting:

• The transaction ID and confirmation email associated with the charge. Many streamers use third-party tools that facilitate receiving tips and donations from external payment platforms. Any documentation you receive that confirms the details of the transaction should be part of your evidence packet.
• Screenshots, video clips, or chat logs showing the donation, or discussion about the donation. It’s always a good idea to thank your fans for their financial support — not just because it’s the right thing to do, but because it can help prove that the cardholder made the donation intentionally.
• A screenshot of your stream or donation page that includes a disclaimer stating that tips and donations are strictly voluntary, that you do not provide any goods or services in exchange for them, and that they are non-refundable.

The Bottom Line on Twitch Chargebacks

While following these best practices can’t guarantee that you won’t get hit with chargebacks or that you'll win every time you fight them, they can provide a good foundation from which to prove to issuers and payment platforms that you aren’t engaged in any shady behavior.

Not so long ago, credit cards were new and different, and we all had to change many things about the way we handle transactions in order to accommodate this innovative technology.

While streaming has been around for some time now, it’s still novel enough that some banks may struggle to place streamer donations and their various dispute scenarios in the proper context. It can be frustrating to lose out on a donation unfairly, but keeping good records, following best practices, and submitting compelling evidence to fight disputes are the best things streamers can do to prevent chargebacks.

As streaming becomes more of a mainstream form of entertainment, the financial world’s understanding of it will catch up, and streamers of the future may be able to enjoy better protections and resources to help them earn and keep their revenues.

For now, streamers struggling with chargebacks may benefit from hiring expert help to prevent and fight chargebacks. A professional chargeback management company can help you figure out the best way to prevent chargebacks for your specific business, and can fight chargebacks on your behalf to recover as much revenue as possible.

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