I would like input on customers who pay for yearly service and are aware of the 30 day money back and use the server for lets say 3 months.

Then they contact you and say they no longer want your service for reasons which DO NOT included server or network trouble (eliminating the technical difficulty route). They just simply want to leave to go to another host or just dont want to keep up their web site.

Should a host have to refund the remaining months that they did not use or should they be able to keep the rest of the money for the remainder of the year....

Prorate it. Otherwise you're charging them for unused services.

Brian

Some take the view that the contract is binding and must be fulfilled. Others say you are due a refund on unused services. Law and practicality are often at odds on this issue and much of the law hinges on the wording of the agreement.

For that reason, we have specifically addressed this in our agreement. If a customer fails to fulfill the full year, then we adjust any time used to the regular/monthly rate plus any setup not charged and then refund the difference. This is standard from many apartment rental contracts where discounts are given for longer leases. In a service business, we don't feel it is appropriate to hold someone against their will. On the other hand, we do want to be fairly compensated for our services.

The few times we have applied this have been when someone decided just to give up on their site. Example: Regular plan is $14.95 per month. Lady purchases and pays one year at $149.50 (discount for prepayment). After 3 months, she decides the web is not for her. We calculate 3 months at $14.95 for $44.85. Subtract from $149.50. Refund $104.65. Seems fair. Clearly in our TOS. She's happy to get anything back. We got paid for what we provided.

Prorated without the discount.
If you don't offer a refund all you have is bad word of mouth.

I thought i would ask because it is hard to say which way to go with this. Technically if you leave the account open for the remainder of the contract, you arent breaking your end of the deal.

eh, i just thought i would see what others think.

Originally posted by Walter
Prorated without the discount.

I agree with what Walter said. Since they did not stay the whole year, they should not get the discount. So if the account they were on costs $9.95/mo and they payed for a year (let's say $99.95/yr) and now they want to cancel after 3 months, then you should charge them 3 x $9.95 = $29.85 and refund the rest.

We give prorated refunds with the discount.

But then we don't give a discount just because we want to lock them in as a customer for a year, but because it saves us a year's worth of credit card billing.

We do subtract a processing fee though, to generate and mail a check.

Surprising how many of our prepaid customers think that they're locked in though, because they don't read the service agreement. We could probably get away with turning our yearly prepaid discount into a yearly service committment.

I would recommend a cancellation fee. This way the math is easier.

You don't prorate anything. Simply refund a client the remaining balance minus the cancellation fee.