How to Prevent & Beat Twitch Chargebacks in 2024
As an aspiring streamer, I wanted to understand how to avoid chargebacks on Twitch. That’s why I spent hours researching this topic.
Now, I’ll walk you through the basics of chargebacks and how to prevent them.
Let’s first refresh your memory on what a chargeback is.
Key Takeaways
- Most chargebacks on Twitch are caused by “friendly fraud.”
- Over 75% of all chargebacks are due to friendly fraud.
- Chargeback alerts can help prevent disputes before they escalate.
- StreamElements is another great tool to prevent chargebacks.
- If you sell merchandise, you may face a higher risk of chargebacks.
- Chargeback fees can cost up to $20 per dispute.
One of the best ways to avoid chargebacks is to use chargeback alerts. These alerts notify you when there’s a potential dispute, giving you the chance to resolve it before it becomes a problem.
Learn more about how they work.
What is a Chargeback?
A chargeback occurs when a customer asks their bank to reverse a payment. It's a formal dispute process that returns funds from a merchant's account back to the customer's card. Banks review these claims to protect cardholders from unauthorized or unfair transactions.
Think of it as a forced refund, but with a hefty fee attached. For every dollar lost in a chargeback, you’ll lose $2.40 [1]. More on that later.
Why wouldn’t the donor just ask for a refund? Chargebacks are easier. 76% of customers go through their bank for chargebacks rather than contacting the merchant [2].
Moreover:
Let’s say you’re dealing with a troll. They couldn’t troll you if they got a refund. You don’t lose anything in a refund other than the donation’s value. As mentioned, chargebacks also come with fees.
These fees come from your payment gateway.
Your payment processor won’t decide the outcome. They act as a middleman during the chargeback process. So long as you decide to fight it. I’ll explain this process later.
Check our guide on chargebacks for more details. If you plan to sell merchandise, I recommend reading every guide on our blog. You’ll know why later.
Let’s dive into chargeback trolls.
Summary: A forced reversal of funds from the streamer/merchant.
What is a Twitch Chargeback Troll?
A chargeback troll is someone who intentionally files a dispute on a donation. Chargebacks happen for various reasons, like confusion, overspending, or simply trolling.
These folks abuse customer rights just to watch your world burn.
Here’s a picture of what they look like:
Photo by Free Nomad on Unsplash
Most guides about chargebacks don’t focus on trolls, but these likely make up the majority. “Friendly fraud” accounts for 75% of all chargebacks.
“Friendly fraud” happens when a cardholder disputes a valid transaction. It’s a bit complex because many institutions don’t differentiate between “chargeback fraud” and “friendly fraud.”
Some payment processors use the terms interchangeably. But the intent behind them is different.
Chargeback fraud is when a person deliberately tries to scam a business or streamer. It’s illegal and can lead to up to 20 years in prison. Courts may charge it as wire fraud, grand theft, or petty theft.
We explain the types of crime that chargeback fraud could be considered in another guide.
Friendly fraud happens when the cardholder doesn’t know they’re committing fraud.
We compare the differences between these types of fraud in this guide.
Since 2021, Twitch has started banning users who repeatedly file chargebacks [3]. PayPal took action in 2016 when a user tried to fraudulently charge back $50,000 after donating to multiple streamers.
There was a video of the culprit doing these donations live, but YouTube removed it.
Let’s now discuss why chargebacks happen.
Summary: They file fraudulent chargebacks.
Why Do Chargebacks Happen on Twitch?
Chargebacks happen on Twitch for several reasons:
- Trolling: They want to cause harm to the streamer.
- Buyer’s remorse: The viewer regrets donating.
- Lack of clarity: The streamer’s refund policies are unclear.
- Viewer dissatisfaction: The viewer isn’t happy with the content or interaction.
- Unauthorized transactions: The viewer claims they didn’t authorize the payment.
- Technical issues: Problems during the donation or subscription process.
Most chargebacks on Twitch are friendly fraud or true fraud.
You’ll see the term “friendly fraud” a lot in this guide.
Friendly fraud happens when someone disputes a legitimate transaction. For example, a fan who lives with their parents might use their credit card to donate to you.
While this is technically fraud, it isn’t “true fraud” because it wasn’t a criminal act.
True fraud occurs when a person’s card is stolen and used without permission.
Chargeback fraud happens when someone intentionally lies about a chargeback to steal money from you. They may claim their card was stolen, even if it wasn’t.
Without fraud detection tools, it’s hard to prove whether the cardholder was responsible for the donation.
Now we know the causes. Let’s learn how to prevent them.
Summary: Twitch chargebacks come from friendly fraud, chargeback fraud, or when someone steals the cardholder’s card.
How to Protect Yourself from Chargebacks on Twitch
The following sections will explain ways to prevent Twitch chargebacks:
- Use chargeback alerts: Get notified when a chargeback starts.
- Enable StreamElements chargeback protection: Add security to handle chargebacks.
- Write a clear disclaimer: Tell users your refund policies to prevent confusion.
- Avoid accepting tips when possible: Lower risks by avoiding chargeback-prone transactions.
- Consider alternative payment methods: Use options less prone to chargebacks.
Since you get chargebacks while streaming, disputes will come from 2 sources: chargeback fraud and true fraud.
If you’re dealing with trolls, some of these methods might not work. Trolls will try to file chargebacks regardless of your safeguards.
Note: PayPal has seller protections, but they don’t apply to donations or tips. It won’t help you with chargebacks. Consider other payment options, which I’ll discuss next.
Let’s start with chargeback alerts.
1. Use Chargeback Alerts
Chargeback alerts let merchants know in advance when a chargeback is filed. This early notice, called “pre-dispute,” gives you a chance to refund the donor before their bank finalizes the chargeback.
Chargeback alert providers like Ethoca, CDRN, and RDR allow users to connect with payment gateways like PayPal, Shopify, and Stripe. Each service covers different card brands, which is the biggest difference between them.
We provide a full comparison in another guide.
These alerts can prevent up to 40% of chargebacks. Using all 3 can prevent up to 91% of disputes. Your results depend on your industry, payment history, and other factors.
With early warnings, you can contact the viewer directly or offer a voluntary refund.
Refunding at this stage helps you:
- Avoid extra fees
- Protects your chargeback ratio
- Prevents issues with your payment processor
Chargeback ratios measure your chargebacks compared to sales. Here’s a guide with more information.
However:
Chargeback alerts cost a fee per alert. They’re most useful for streamers with frequent chargebacks. For smaller streams, the cost may not be worth it.
Here’s a guide to help you determine whether these alerts are worth it.
Let’s move onto a more affordable way to prevent disputes.
2. Enable StreamElements Chargeback Protection
StreamElements has a strong chargeback protection system, which includes:
- Blacklists: A constantly updated list of users who file chargebacks.
- It also bans these users.
- No chargeback fees with SE.Pay: They cover all fees.
If Reddit is a trustworthy source, I’ve seen many success stories with folks switching to StreamElements. I’ll use it whenever I stream.
According to StreamElements, their Advanced Chargeback Protection works with SE.Pay and PayPal:
But:
If a chargeback occurs, they won’t cover PayPal’s fees. They will cover 100% of SE.Pay’s fees.
SE.Pay is their credit card gateway, available in select countries, including the US and UK. However. You need more than 100 followers to use it. Their requirements guide has more information.
“Followers” refer to Twitch followers or YouTube subscribers.
“Chargeback protection” doesn’t mean they fully prevent disputes. It means they help cover the costs involved. Though, the blacklist feature can prevent known troublemakers from donating.
Let’s move on.
3. Write a Clear Disclaimer
A “clear disclaimer” means stating that donations are non-refundable. And that donors won’t get anything in return for tips.
This might prevent some chargebacks.
If you use StreamLabs or StreamElements, their terms of service handle this for you. Their terms state that tips aren’t refundable and don’t offer anything in exchange.
What if you just stopped accepting tips?
4. Avoid Accepting Tips When Possible
The easiest way to avoid tip-based chargebacks is by not accepting tips. This may not be ideal since tips are a major source of income. But if you’re experiencing a wave of chargeback abusers, you might need to lower your chargeback rate.
If you get too many disputes, platforms like PayPal may increase chargeback fees per dispute. You could even lose your PayPal account.
If you’re an Affiliate or Partner on Twitch, consider only accepting Bits as tips. I’ll explain why next.
Or…
5. Consider Alternative Payment Methods
Some platform-based payment methods, like YouTube’s Super Chat, Super Thanks, Super Stickers, and Twitch Bits. These proprietary currencies don’t cause chargebacks for you. These platforms take a larger share, partly for profit, but also to manage chargeback issues for creators.
You could also consider accepting cryptocurrency for donations. Cryptocurrencies don’t have chargebacks due to minimal regulation.
Because of this, it’s difficult for me to recommend any legitimate platforms to accept donations through. Brave Browser has the Brave Creator program, which allows you to receive donations via Basic Attention Tokens (BAT). But I’ve never heard of anyone getting much from this.
One of Brave’s blog posts also suggests you can just accept donations by sharing your coin wallet address [4]. If the public has that address, they can view its purchase history and balance [5].
You have ways to prevent chargebacks. Great. Let’s focus on lowering your overall chargeback risks.
Tips for Reducing Chargeback Risks
The sections below expand on tips to reduce chargeback risks:
- Don’t rely on tips as your only income: Diversify your income to lower financial risk.
- Avoid incentives for tips: Prevent chargebacks by not attaching rewards to tips.
- Require logins before tipping: Adding verification helps prevent fraudulent transactions.
- Disable Text-to-Speech (TTS): Avoid misuse by removing TTS from donations.
- Block problematic viewers: Manage interactions to reduce risky exchanges.
- Accept Bits and subscriptions only: Use platform options less prone to chargebacks.
Here we go.
1. Don’t Rely on Tips as Your Only Income Source
Avoid relying solely on tips. A few chargebacks could lead to account restrictions. Cutting off your main income stream.
Consider other income sources:
- Sell merchandise: Offer products related to your brand.
- Ad revenue: Earn money from ads.
- Patreon: Set up donation tiers.
- Affiliate links: Earn commissions on recommended products.
- Sponsorships: Get paid to promote products.
Selling merchandise opens you up to chargebacks, but you’ll have more protection options. Marketing and choosing appealing products take extra effort, though.
You can’t go wrong from ads. Some successful streamers earn $3,000 – $6,500 monthly from ads. Meanwhile, others make under $100.
Set up different tiers on Patreon or similar platforms to earn a steady income. A $1-a-month tier can be offered as a “tip” without promising a product. From there, if someone filed a chargeback, Patreon would deal with it.
This setup saves you time and reduces chargeback risks with services like PayPal.
Patreon keeps 5% of your earnings, but this fee buys convenience.
Affiliate links involve you pasting links from, for instance, Amazon to your stream’s description. If someone buys something from Amazon within a timeframe, you’ll earn a commission.
The “amount of time” will depend on your affiliate program.
I shouldn’t need to explain sponsorships to you. A sponsor will set terms of payments for you to promote their product.
Otherwise, you’ll need to get creative to diversify your income streams.
Good luck.
Speaking of incentives…
2. Avoid Offering Incentives for Tips
Don’t promise your viewers anything in return for tips. This sets expectations and gives them a way to tell their bank or issuer “the streamer didn’t do what they promised.” And never use language that suggests you’ll do something for tips.
The cardholder can use that against you as evidence.
Even saying, “Tip $5, and I’ll give you a shoutout!” can cause issues. If you don’t fulfill this as expected, viewers may claim you didn’t deliver what they paid for.
Also, avoid words that hint at transactions or purchases. This language makes tipping seem like a business deal. Increasing chargeback risks.
Instead, use language that frames tipping as voluntary support with no strings attached.
To stay safe, keep tip messages neutral. Thank your audience for supporting you, and remind them that tips are non-refundable gifts meant to help the stream grow.
This next point will also do a lot to help with chargebacks.
3. Require Users to Log In Before Tipping
Using third-party tools like StreamLabs or StreamElements to require logins before tipping adds security. Logging in verifies viewers’ identities. Making it harder to claim unauthorized payments.
This step also discourages impulsive tips that could lead to regret and chargebacks. With a login requirement, viewers are more intentional in their support.
Having logged-in users provides evidence if a chargeback happens, helping you contest it with documentation that shows authentication.
What if they troll you through Twitch donations?
4. Disable Text-to-Speech for Donations
Many Twitch trolls will abuse the text-to-speech (TTS) system to give you a double whammy. First, if you were livestreaming in public, a donation could make TTS say awful things. Embarrassing you in public.
From there, they’d do a chargeback on the donation, claim it was fraud, and screw you over with a chargeback fee.
Yes, it does encourage users to donate. Though, you’re breaking a rule by “promising” them something if they donate. But many will abuse this system.
I’ve watched a lot of expose videos on “toxic” streamers. Their viewers used TTS to cause a nuisance in public. The attention, and low donations, you get from this aren’t worth the trouble.
Or you could prevent certain viewers from donating.
5. Block or Restrict Problematic Viewers
Blocking problematic viewers may reduce chargebacks. However, you often won’t know who’s a risk until after an issue arises.
On platforms like Twitch, you can ban viewers you suspect of causing issues. StreamLabs and StreamElements also allow you to block specific folks from tipping.
These bans won’t stop people from creating new accounts — if they’re determined enough. But this could stop a chargeback or two.
This next way is actually a way to stop chargebacks on your end.
6. Only Accept Bits & Subscriptions Instead of Tips
Using Bits and subscriptions instead of tips can help avoid chargeback fees, as Twitch handles chargebacks for these transactions. You won’t face extra fees if chargebacks occur.
You will lose more money since Twitch takes a large percentage of your Bits and subs. That’s the cost of convenience, though.
That means chargebacks will still happen. But that means the donor is facing a multi-billion-dollar business in a chargeback case. Not a streamer.
And you could still have to “refund” those Bits or subs to the viewer. Thus, you should wait a while to touch those funds.
There are streamers who’ve gotten banned from receiving “fraudulent” Bits. Meaning, bits that were purchased using fraudulent accounts. However. The last instance of this I could find is from 7 years ago. It must not be a “thing” nowadays.
But it’s something to consider.
To use Bits and subscriptions, you must become a Twitch Affiliate or Partner.
Requirements include:
- 50 followers
- Streaming on 7 different days (12 for Partner)
- An average of 3 viewers (75 for Partner)
- Streaming for 8 total hours (25 for Partner)
Here’s one more way you could mitigate chargebacks.
Dealing with Twitch Chargebacks
Twitch streamers can contest chargebacks by providing evidence. Proof you could provide includes chat logs and acknowledgments from the stream. Contact the viewer directly before disputing the charge through your payment processor. Ensure all transaction details are readily available.
First:
You’ll need to address the chargeback request. Once a chargeback happens, it’s too late to prevent the dispute's financial impact. Even if you win, you’ll still incur a chargeback fee.
Once a chargeback happens, you’ll go through the chargeback process.
It begins with a pre-dispute. When the viewer files a chargeback with the issuer. During this stage, you won’t get a chargeback fee and the dispute won’t contribute toward your chargeback rate.
When a chargeback happens, it goes through a formal process, starting with a pre-dispute. At this stage, the viewer files the dispute with the issuer.
During pre-dispute, you won’t incur a fee, and it won’t count against your chargeback rate. You’ll only know about this phase if you use chargeback alerts or PayPal’s pre-chargeback notifications.
If you’re unaware of a pre-dispute, you may only learn of the chargeback when it’s too late to prevent the fee. At that point, you’ll need to choose whether to accept the chargeback or fight it.
To dispute, submit evidence for review by the issuer, who decides whether the chargeback holds.
Don’t waste your time fighting a chargeback if there’s suspected true fraud. Like when a stolen card is used. The win rate for this type of chargeback is 9%. And you’d typically only be able to win this if you have robust fraud detection tools.
If you suspect friendly or chargeback fraud, fight it.
Your chances of winning are around 42%. Higher than the average 30% win rate.
During the dispute, you’ll communicate with your payment processor (e.g., PayPal).
Provide them with evidence, such as:
- Transaction ID and confirmation email
- Screenshots, video clips, or chat logs
- A copy of your return policy
- Relevant portions of your terms of service
The goal is to prove that the cardholder was intentionally dishonest and understood what they were paying for. Note that PayPal won’t decide the chargeback outcome unless the dispute is within their system.
If so, review our guide on fighting PayPal disputes.
After submitting evidence, you’ll wait for the issuer’s decision.
If the chargeback is upheld, you may be able to appeal if your acquirer allows and you have additional proof to support your case. Each provider has its chargeback process. Though most donations go through PayPal, leading to disputes on that platform or via credit card.
Here’s a guide on the chargeback process in general. Check it out.
For now, let’s review how to prepare yourself for chargebacks.
Summary: Submit evidence to your payment processor and wait for a decision.
Best Practices for Managing Chargebacks
Here are some tips to help manage chargebacks:
- Save VODs locally as evidence: Keep content proof for chargeback disputes.
- Delay using tips to ensure funds clear: Wait until funds settle before using them.
Let’s dive in.
1. Save VODs Locally as Evidence
Saving VODs (Videos on Demand) locally protects against chargebacks by preserving a record of the streamed content. Having a local copy offers verifiable evidence of what aired. This is crucial if a viewer claims they didn’t receive what they paid for.
If a chargeback is filed, these recordings can show what happened during the stream, proving you delivered promised content.
For example, if a viewer disputes a tip made during a live request, show you followed through on the related actions.
Since online VODs can be lost due to platform issues or accidental deletion, a local backup ensures independent proof.
Use an external hard drive or cloud storage to archive streams securely. Keeping them for several months to cover potential chargeback periods.
And when you receive a tip, don’t immediately spend it.
2. Delay Using Tips to Ensure Funds Clear
It may be tempting to spend tips right away. But it’s safer to wait at least 180 days before using them. This protects you from chargebacks that can occur long after the original transaction.
Most major card networks allow customers to file a chargeback up to 180 days after a transaction. This rule means those funds could be pulled from your account long after the original tip.
If the customer uses Discover, they could have up to 2 years to file a chargeback for certain instances of fraud.
I wouldn’t stress too much for the Discover chargebacks.
By keeping these funds on hold, you ensure you’ll have money available to cover any disputed tips, helping you avoid unexpected financial losses.
How much do tips actually cost streamers?
How Much Do Chargebacks Cost Streamers?
Chargeback fees for streamers vary by platform and dispute type:
- StreamLabs: $15 per chargeback.
- Stripe: Around $15 per chargeback.
- PayPal: $20 for credit cards; $8 – 16 for PayPal disputes; $16 for pre-arbitration.
When you handle a chargeback, you’re responsible for the tipped amount plus a chargeback fee. For example, if someone donates $666 on PayPal and disputes the charge, you’ll lose $686. You’ll also waste valuable time dealing with the dispute.
If a processing fee was deducted from the tip, you’ll lose that amount, too.
Chargeback fees can pile up. For instance, if someone tips $1 and then disputes it, you’d still lose $16 or more. Since fees don’t adjust based on the donation amount.
Though, from what I’ve heard, many banks will just refund customers such small amounts to avoid dealing with the chargeback process. Because these processes also demand banks and issuers to waste resources.
PayPal and Stripe do not refund chargeback fees, even if you win a dispute.
However:
StreamLabs does refund these fees for won disputes:
Source: StreamLabs
Then there are the consequences of having too many chargebacks.
If your dispute rate reaches 1.5% with over 100 transactions in three months, PayPal may charge you higher fees. Such as $16 instead of $8 per dispute.
If someone made multiple donations then did chargebacks on all of them, they could cost you even more. Because you’re paying a fee per dispute.
Story time:
A Swedish Twitch streamer named RelicKris experienced this firsthand. While planning a trip to Japan with tip funds, he found himself with a negative PayPal balance due to chargebacks. Reportedly leaving him and his girlfriend stranded in Japan [6].
Chargebacks also impact content creators who sell merchandise.
Summary: Chargebacks can cost streamers the donation value plus a chargeback fee — up to $20 per dispute.
Chargebacks & Merchandise Sales on Twitch
You decided to expand into selling merchandise. Congratulations. You opened yourself up to more ways to get chargebacks. But you also have more ways to prevent them.
If you’re selling on any platform, you’ll need to know how every platform handles chargebacks.
We have separate guides that explains the process among payment processors:
Most YouTubers use Shopify for merch despite its high subscription fee. Shopify stands out for reimbursing chargeback fees if you win a dispute through Shopify Payments. No other processor does this.
To reduce chargebacks, you’ll need a fraud prevention system. We recommend several Shopify apps for this purpose.
Then, you’ll need to create a chargeback management strategy. This revolves around keeping your chargeback rate under 0.65%.
High rates can place you in chargeback monitoring programs. These programs come with steep fines (up to $25,000 per month) and may even land you on the MATCH list. Making it hard to register with payment processors.
Here’s a guide on what to know about chargeback rates.
And here’s more information on dispute monitoring programs.
When selling merchandise, remember that you’re also liable for merchant disputes. These disputes make up 40% of chargebacks. Such chargebacks result from issues like shipping errors or payment problems.
Jump on these issues before they lead to chargebacks you’ll likely lose.
We offer a detailed guide on preventing chargebacks. Give it a look.
I hope some of this information helped. Good luck with your streaming career. And may the force be with you.
Wrapping Up
Chargebacks cost streamers the donation amount plus up to $20 per dispute. Many payment gateways are working to reduce chargeback abuse, especially with Twitch donations. Though, there’s still progress to be made.
You need to actively protect yourself to prevent trolls from draining your finances.
One great way of doing this is through chargeback alerts. They’ll let you know when a chargeback happens before it could affect you financially.
We make it easy to set up these alerts. Try them out.
Sources
- [1] Chargeback fee cost. Verifi.
- [2] Chargeback statistics. MyMoid. 6/07/2018.
- [3] Refunds on Twitch. Twitch.
- [4] How to set up donations on Twitch. Brave. 7/17/2023.
- [5] Protect your privacy. Bitcoin.
- [6] Twitter post. 12/28/2023.