What is Chargeback Threshold | Solidgate
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Chargeback Threshold

 

Chargeback Threshold represents the predefined limit of chargebacks a merchant can incur within a specific period before facing consequences such as fines, increased processing fees, or even account termination.

Chargeback Threshold Ratio (CTR) is calculated by dividing a merchant’s total number of first chargebacks for a particular month by the previous month’s total number of sales transactions. The CTR provides acquirers and card networks insight into the percentage of a merchant’s transactions that get disputed.

Establishing chargeback thresholds is a risk management practice implemented by acquiring banks and payment processors to monitor and control the number of chargebacks associated with a merchant’s account. Exceeding the threshold signals potential issues with the merchant’s operations, such as inadequate customer service, product quality concerns, or susceptibility to fraud. This can result in higher fees or potential termination of merchant services. Keeping CTRs within limits indicates a generally positive consumer experience and controls dispute volumes.

Merchants should proactively manage their chargeback rates to stay within acceptable thresholds, employing strategies, such as fraud prevention measures, transparent communication, and responsive customer support.

 

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