Risk & Compliance
Chargeback Ratio
Definition
Chargeback Ratio the percentage of transactions that result in chargebacks, calculated as chargebacks divided by transactions over a period. Card networks monitor this ratio closely. Visa's threshold for monitoring is 0.9%; Mastercard's is 1.0%. Exceeding thresholds triggers monitoring programs with fines and potential termination. High-risk MCCs often face stricter benchmarks. Ratio calculated monthly, with some lag for dispute timing.
Related Terms
Chargeback
A transaction reversal initiated by the cardholder's bank after a dispute. Chargebacks return funds to the cardholder and impose fees on the merchant (typically $25-100). Common reasons include fraud, non-delivery, product issues, and billing disputes. Excessive chargebacks trigger monitoring programs and can result in account termination. Prevention is always cheaper than fighting chargebacks.
VAMP (Visa Acquirer Monitoring Program)
Visa's program for monitoring merchants with excessive chargebacks or fraud. Triggered when chargeback ratio exceeds 0.9% or fraud ratio exceeds thresholds. Merchants in VAMP face monthly fees ($25K+), remediation requirements, and potential termination. Program has multiple tiers with escalating consequences. Similar to Mastercard's Excessive Chargeback Program (ECP). Getting into these programs is expensive; staying in is worse.
High-Risk Merchant
A classification by acquirers for merchants perceived as having elevated risk of chargebacks, fraud, or regulatory issues. Common high-risk verticals: gambling, forex, adult, nutraceuticals, crypto, travel, and subscription billing. Consequences include higher rates (1-3% premium), rolling reserves, volume limits, and limited acquirer options. Classification is risk assessment, not legitimacy judgment.
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