Running subscription businesses in 2025 can be a great way to build a steady income and keep customers engaged. But it also comes with risks, especially chargebacks. If too many customers file disputes, payment providers may flag your business. This could lead to extra fees, penalties, or even loss of the ability to accept card payments.
To help you stay clear of these problems, this article explains how to legally run a subscription-based business while keeping chargebacks low. We cover what causes chargebacks, how to avoid them, and which legal and payment rules to follow in 2025.
Why Subscription Businesses Face Higher Chargeback Risks?
Chargebacks happen when a customer contacts their bank and asks for a refund instead of working with the merchant. In subscription businesses, these are often caused by:
- Confusion about billing
- Forgotten subscriptions
- Unclear cancellation policies
- Poor customer service
- Fraud or unauthorized charges
So, because subscriptions are billed regularly, small issues can quickly turn into chargeback patterns. This is why payment providers closely monitor subscription models.
What’s changing in 2025
In 2025, card networks like Visa and Mastercard will have updated their rules for recurring billing. These changes were made to protect cardholders and reduce chargeback fraud. If you run a subscription business, you need to follow these rules carefully to stay compliant and avoid being flagged as a high-risk merchant.
Let’s look at what you should do step-by-step.
1. Get clear customer consent
Before charging a customer, you must clearly explain:
- What are they signing up for?
- How much does it cost?
- How often are they charged?
- How to cancel?
The best way to do this is with a simple checkout summary and a clear terms and conditions page. Make sure the customer actively agrees, for example, by ticking a checkbox or clicking “Agree and Subscribe.”
Also, send a confirmation email right after signup. This builds trust and gives the customer proof of their agreement.
2. Offer easy cancellation options
One of the top causes of chargebacks in subscriptions is a customer not knowing how to cancel. Some businesses try to hide the cancellation process, which often leads to disputes.
To stay compliant in 2025:
- Offer simple cancellation through your website or app
- Avoid forcing customers to call or email
- Allow cancellations anytime, unless you clearly mention a minimum term
For example, if you run a fitness app and require a 3-month commitment, that must be clear before signup. Otherwise, forcing a customer to stay locked in could lead to a dispute, and you’ll likely lose it.
3. Send reminder emails before each charge
Under the new Visa and Mastercard rules, merchants must send a pre-billing reminder for any recurring payment that is:
- More than six months after the last payment
- A trial moving into a paid plan
- Involving changes in the billing amount
A simple email 7 days before billing is enough. It should include:
- The billing date
- The amount
- A link to cancel or manage the subscription
This helps customers remember the charge and reduces the chances of them filing a dispute because “they forgot.”
4. Use accurate billing descriptors
Another major reason for chargebacks is unclear billing. If your charge shows up as “XYZ Tech LLC” but the customer only remembers “FitnessPro App,” they might think it’s fraud.
Make sure your billing descriptor (the name that shows up on card statements) matches what your customer expects. If that’s not possible, use descriptor text like:
“XYZ Tech LLC – FitnessPro App Subscription”
You can also add your support phone or email address to give customers a way to reach you before contacting the bank.
5. Comply with local and global subscription laws
Different countries have specific rules for subscription businesses. In 2025, several updates have rolled out across the EU, UK, and US.
Here are a few you need to know:
- US FTC rules: Require clear opt-ins and simple cancellation for recurring charges.
- UK Consumer Contracts Regulations: Require clear pre-contract info and cancellation rights.
- EU Digital Services Act: Reinforces consent, transparency, and refund rules.
If you sell globally, it’s safest to apply the strictest version of these rules across all customers. This avoids legal risks and keeps your practices uniform.
6. Use 3D Secure and Tokenization
To reduce fraud-related chargebacks, make sure you use 3D Secure 2.0 on initial transactions. This adds a layer of protection and often shifts fraud liability to the card issuer.
Also, work with a payment provider that supports tokenization. This replaces the customer’s real card number with a secure token, reducing the risk of stored card data being stolen or misused.
7. Give refunds quickly (when reasonable)
If a customer requests a refund and has a valid reason, process it fast. A prompt refund is much better than a chargeback.
Even if the request comes after the refund period ends, consider the situation. For example, if the customer was charged after they thought they had canceled, it might be worth issuing a goodwill refund.
This builds customer trust and lowers your chargeback ratio.
8. Track your chargeback ratio carefully
Most payment providers allow a chargeback ratio of under 1%. This means less than 1 chargeback per 100 transactions.
In 2025, card networks are lowering thresholds under programs like Visa’s VAMP and Mastercard’s Excessive Chargeback Program. If your ratio goes above 0.9% or worse, 1.5%, you may:
- Pay extra fees per chargeback
- Get added to a monitoring program
- Lose access to your payment gateway
So check your chargeback metrics weekly. If you see a rise, review your billing, customer service, and refund processes immediately.
9. Avoid common subscription traps
Some tactics might boost short-term revenue but lead to long-term problems:
- Hidden auto-renewals
- Free trials with unclear conversions
- No cancellation confirmation
- Charging after cancellation
All of these are red flags. Avoid these practices, and instead focus on building a loyal customer base that knows what they’re paying for.
10. Respond quickly to disputes
When a chargeback happens, act fast:
- Provide evidence (consent, billing info, support logs)
- Use your PSP’s dashboard to submit the response
- Follow deadlines closely
Most disputes can be won if you have clear records. Keep copies of:
- Order confirmation emails
- Cancellation records
- Chat logs or email responses
- Screenshots of your terms and checkout page
Also, consider using tools like Rapid Dispute Resolution (RDR) if offered by your provider. This can automatically refund certain disputes before they become chargebacks.
Bottom Line
Subscription businesses have big potential in 2025, but they must be run with care. New card network rules, stricter legal standards, and higher customer expectations all make compliance essential.
The good news is that avoiding chargebacks isn’t hard if you:
- Are honest and transparent
- Make cancellation easy
- Communicate clearly before billing
- Handle refunds professionally
- Track and respond to disputes fast
With these practices in place, you can grow your subscription business legally and safely—without ending up on a chargeback alert list.
For further insights, read our article: “How to Use Ethoca & Verifi to Protect Your High-Risk Business?”
If you want to know more about this matter, don’t hesitate to schedule a free consultation with our team.
Disclaimer
Widelia and its affiliates do not provide tax, investment, legal, or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, investment, legal or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Please consult https://widelia.com/disclaimer/ for more information.
