hether you’re a high-risk or low-risk merchant – chargebacks apply to everyone. Not only do chargebacks harm your bottom line, but they can also negatively impact your standing with card associations.
Chargebacks happen when a customer disputes a transaction. Customers may dispute transactions for a number of reasons, including non-delivery of products and services, miscommunication about a refund, misunderstanding of the amount of the charge, or a variety of other reasons.
Whether you realize it or not, card associations are paying attention to your chargebacks! Specifically, they keep an eye on your chargeback ratio.
A chargeback ratio measures the ratio between the number of chargebacks to the number of transactions you have earned as a merchant.
Simply divide the number of chargebacks by the number of transactions to determine your chargeback ratio. However, it’s important to note that there is an important distinction in how Mastercard and Visa calculate chargeback ratios.
Visa divides the number of chargebacks for the current month by the number of transactions for the current month.
Mastercard, on the other hand, divides the number of chargebacks for the current month by the number of transactions of the previous month.
Regardless of the card association, it’s crucial that you keep your chargeback ratios to a minimum so that your business stays off the “risk list”.
As a general rule of thumb, a chargeback ratio at 1% or above can potentially harm your business, so you will want to do everything you can to prevent chargebacks from occurring.
Here are a few proven ways you can prevent chargebacks:
When it comes to chargebacks, timing is critical.
We have extensive experience in helping businesses successfully navigate chargebacks.
Get in touch with us now for one-on-one help in resolving a current chargeback issue or to create a game plan to limit chargebacks in your business.
Fill in the form to get in touch with us and learn how your business can save on credit card processing fees.