Chargeback ratio
A chargeback ratio is a merchant’s chargebacks received in a month divided by its card transactions, counted in the same or a previous month. Card schemes and acquirers use it to measure chargebacks and may use thresholds to decide when a merchant enters a monitoring programme.
Example
For illustration, a merchant receives 20 chargebacks in a month and has 2,000 card transactions in the comparison month. The chargeback ratio is 20 divided by 2,000, or 1%.
How the chargeback ratio is calculated
The calculation counts chargebacks and card transactions, rather than comparing their monetary values. The transaction month may be the same month as the chargebacks or the previous month.
For illustration, 12 chargebacks divided by 1,500 card transactions gives a ratio of 0.8%. The month used for the transactions can affect the result, so the calculation should be read with its measurement period.
What happens above the thresholds
Card scheme monitoring programmes may start at about 0.9% to 1%, and also require a minimum number of chargebacks. Exact thresholds and rules vary by scheme and can change, so these figures are not a universal trigger.
A merchant in a programme pays fines and must bring the ratio down within months, or can lose the ability to take cards. Better checks before payment can reduce fraud chargebacks. Clear descriptors and refunds can help reduce dispute chargebacks.
Questions we get asked
Is the chargeback ratio based on transaction value?
No. It is calculated by count, not by the value of the transactions or chargebacks. The result compares chargeback count with card transaction count.
Can two merchants with the same chargeback count have different ratios?
Yes. The ratio also depends on the number of card transactions. The same chargeback count gives a different ratio when the transaction counts differ.
What is a good chargeback ratio for a merchant?
There is no single threshold that applies across card schemes. Monitoring programmes start at about 0.9% to 1%, but exact rules vary and may include a minimum number of chargebacks.
Decisimo’s free chargeback ratio calculator shows the ratio by month against the acquirer’s thresholds, and how many chargebacks keep a merchant under the limit.
