Hypothetically speaking is it ok to refuse to refund a customer who has payed for a year if they want to cancel their account for any reason? Afterall what would be the point of giving people a discount to sign up for a year if they can cancel after 2 months and get the rest of their money back.

I would think you could offer a prorated discount based on a early cancellation clause that changes the charge to the regular monthly fee. Refusing to refund it altogether sounds like you'd guarantee a chargeback.

What you could do is charging them the full amount. So, if the normal price is $20 per month and the annual is $15 and paid $180 for the full year, then just deduct $40 from the $180. Or just give them refund from the remaining months...it's better than a chargeback :) It depends what you have in your TOS.

If client cancels -> no refund is ok. If client purchased 1 year of hosting and finally doesn't need it, that's his problem. 1 year isn't excessively long, so a 1 year contract is perfectly valid. I cannot imagine a successful chargeback in such a situation, only dealing with chargeback attempts might give some administrative work, though.

However:
Usually client will want to cancel because he's not happy with the service, i.e. you don't provide the features / quality of service which you have promised. In this situation he is entitled for a refund (pro rata temporis at leas, I think). If this refund can be forced through a chargeback? I'd say it depends...

One year is very long with the number of scam hosts running around out of control. Cover your costs, and prorate the rest, IF the customer has no justifiable reason to cancel.
It will make you more money in the long run.

Hmm,... I'd handle it like this:

If client simply cancels, not giving any reason -> no refund.

If client alegs lack of service and cancels for this reason: -> give refund (pro rata temporis) if the complaint is somewhat justified.

Maybe another factor is price and type of service, e.g. if package includes much bandwidth, I'd give a refund more easily because indeed he will not use these ressources if the account is terminated etc. etc....

I guess a bit of common sense is the best rule to decide such things :)

For us, we dont offer a refund after the first 30 days. We do offer a 30 day money back. They will know within 30 days if they are happy with the service or not. For them to go 3-6 months into the year, and then request a refund....even the card company would look at that and be suspicious. I think they have a time limit anyway from the time of purchase.

We decided to always refund for full months paid for if a customer cancels. In other words, if they have 8 1/2 months left, I refund the 8 months. This is in our TOS. It lets us keep the partial mo.

I know it is not much, but these days, anyone can just call their bank and charge you back if they paid by CC, then you loose it all.

Regards
AH

Put yourself in the position of the customer and you will have your answer.