The proportion of transactions disputed by customers compared to the total transaction volume.
Chargebacks are a necessary evil for merchants accepting credit card payments - but high dispute rates can wreak havoc. Maintaining an optimal chargeback ratio is key for transaction processing health. Understanding best practices for mitigating chargebacks helps businesses stay in good standing.
A chargeback ratio compares total chargebacks against total transactions processed in a period. Card networks monitor this metric to identify high-risk merchants.
Acceptable ratios vary by industry but typically fall between 0.5-1%. Ratios above 1% raise concerns.
Common reasons include:
Careful vigilance of policies, operations, and disputes keeps chargebacks in check.
Left unchecked, excessive chargebacks from customer complaints or fraud can sink businesses. But following best practices around prevention, monitoring, and representment creates optimal ratios for smooth payment processing.