To many chargebacks can put a merchant out of compliance. Both Visa and MasterCard have chargeback ratios they use to determine whether or not a merchant is in compliance.
Visa has a charge back ratio threshold of 1% of total sales volume (for any given month) and up to 100 chargebacks. Master Card is exactly the same scenario, only their threshold is a 0.5% ratio, and 50 total chargebacks in any given month. In addition, you can find more information regarding these programs at:
You can calculate your charge back percentage by dividing the dollar volume of chargebacks in a month by the total dollar volume of Visa/MasterCard transactions processed in that same month.
If you are concerned about chargebacks please contact us immediately. Platinum Payment Systems specializes in handling higher risk accounts and helping the merchant reduce their chargebacks and chargeback costs. We can also fight your chargebacks for you through our Consumer Credit Mediation and Chargeback Defense Service.
Here is how the Chargeback Process Works
- One of your clients or shoppers has a problem with a transaction that took place at a merchants site.
- The shopper informs their credit card issuer about the problem and asks for their money back.
- The card issuing bank then reimburses the shopper the amount of the disputed transaction.
- The card issuing bank then starts a special process, called chargeback, and obtains funds from the merchants processing/acquiring bank that will in turn debit the amount directly from the merchants bank account along with the chargeback processing fees.
- The acquiring bank sends a Notification of Chargeback (NoC) and a Request for Information (RFI) to the merchant.
- The merchant provides documentation to the shoppers issuing bank to dispute the NoC.
- If the merchant provides sufficient amount of documentation to show they did not deserve the chargeback then the card issuing bank will reimburse the merchant and debit the shopper the disputed amount. If the information is not sufficient then the merchant looses the chargeback dispute and the money is gone for good.
