What Is Average Dispute Rate For Credit Card Merchant Services

While everyone knows that high chargeback rates hurt your credibility as a merchant, “high” remains vague. How many chargebacks are one too many? Merchants typically strive for a chargeback ratio of 1%, which is calculated by dividing your monthly chargeback cases and total transactions together. However, the number of disputes you get might be a bit higher.

Statistics show that merchants win around 40% fraudulent and non-fraudulent chargeback cases. Going by the universal 1% chargeback rate threshold, a business with 10,000 monthly transactions should keep their disputes under 250 and win at least 150 chargeback disputes. Otherwise, your card network or processor flags you as high-risk.

Institutions That Might Disagree With the 1% Rule

Abiding by the 1% rule may vary depending on the following institutions:

  • Card Network: Mastercard flags merchants as high-risk after receiving a hundred monthly chargebacks for two months or hitting a 1.5% chargeback rate, whichever comes first. Visa, on the other hand, has more stringent guidelines. They give warnings at 0.65% chargeback rates and flag accounts at  0.9%
  • Acquiring Banks: Acquiring banks minimize their risk of taking on disputes by monitoring their clients’ chargeback rates.
  • Payment Processor: Third-party payment processors also play a proactive role in representing their clients against chargebacks disputes. This authority gives them a say in the ideal chargeback rate threshold.

Taking fast action against disputes plays a crucial role in minimizing your chargeback rate. Always keep your sales documents organized so that you can send and access them as needed. Try storing digital and physical copies of your invoices. Also, respond to disputes within  7 to 10 days because otherwise, you might lose the case by default.

Are you having trouble qualifying for a merchant account because of your high chargeback rates? Processing Card has you covered! Read our brief introduction to applying for high-risk merchant accounts for more information.

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