The Problems with Chargebacks and How to Handle Them

While your gym can have policies that help protect you concerning money, your members have some of their own consumer protections that may backfire on you, regardless of any policies or practices you have in place. A chargeback through a credit card is one of them, which poses a difficulty for gyms just like it does for other types of businesses. Is there anything you can do? Let’s take a look.

The Challenge of Chargebacks for Your Gym

Chargebacks can happen when members pay their dues by credit card, resulting in the consumer taking back the money they previously paid to your gym. Basically, the term refers to the credit card-issuing bank reversing a payment as part of a dispute resolution from the consumer.

So, an example could be that your gym automatically charges a member’s credit card for the next month of membership, and then the consumer files a dispute regarding the payment with the credit card, perhaps giving a reason that they attempted to cancel the membership but were still charged the dues. Now you have a delinquent member account and the challenge of a chargeback.

If the bank decides in the consumer’s favor, they can then reverse the payment, effectively taking the payment you received away from you and giving it back to the consumer (your previous member). The chargeback alone generally comes with a fee to your business ranging from $20 to $100. If you get numerous chargebacks, the fee increases and you can face other consequences like fines or a canceled merchant account.

Do You Have Any Recourse?

It’s helpful to have a plan in place for how your gym will handle chargebacks. You don’t necessarily have to accept the lack of payment. You can try fighting the chargeback with the bank by providing your side of the story with supporting documentation. However, the process tends to go in the consumer’s favor, as businesses only win 21 percent of these disputes. In addition, the resolution process can take weeks or even months to resolve.

What else can you do? The better method for a gym is to send people to collections when they fail to pay membership dues, even after a chargeback. This is an effective way for your business to earn the money you are owed and is more effective when the collections calls are coming from a legal office. Collections can help you retrieve the lost money in place of fighting the chargeback or if you have lost the dispute.

Since the collections process includes reporting on a person’s credit, it creates a consequence for consumers failing to pay and for demanding a chargeback from the credit card. By sharing your policy to send unpaid memberships to collections upfront, you may reduce the number of chargebacks you receive in the first place.

Turn to Collections in Response to Chargebacks

Overall, chargebacks pose a challenge for every gym, and every business, for that matter. You can take steps to prevent them, such as through clear billing and communication processes, or to dispute them. But when these measures fail, the collections process provides an effective way to collect your owed dues. Using a collections call center that is specialized in fitness and that goes through a law office can maximize effectiveness.

This is what you can expect from Aldous & Associates. Our collections process can provide a deterrent to missed payments or chargebacks and is effective at collections when this step is needed.