As you know, a chargeback is when a cardholder disputes a charge with their credit card issuer. This can happen for a variety of reasons, but usually, it's because the cardholder didn't recognize the charge or they feel that they were wrongfully charged.
If a cardholder initiates a chargeback, the merchant will first be notified by their acquirer (the bank that processes credit card transactions for the merchant). The merchant will then have the opportunity to respond to the chargeback and provide evidence that the charge was legitimate.
If the merchant does not respond or if the response is deemed unsatisfactory, the card issuer will reverse the transaction and refund the cardholder. The merchant will also be charged a fee for the chargeback.
Chargeback limits are put in place to protect merchants from excessive chargebacks. A chargeback limit is the maximum number of chargebacks a merchant can receive in a given period of time before their account is at risk of being terminated.
For example, if a merchant has a chargeback limit of 2% and they receive 100 chargebacks in a month, their account would be at risk of being terminated.
Chargeback limits vary by acquirer, but they are typically between 0.5% and 1%.
What Is the Chargeback Limit in 2022?
The chargeback limit in 2022 is 0.9%. This means that if a merchant receives more than 0.9% chargebacks in a month, their account is at risk of being terminated.
What Happens If I Exceed the Chargeback Limit?
If you exceed the chargeback limit, your acquirer may terminate your account and you will no longer be able to accept credit card payments. This can be devastating for a business, so it's important to do everything you can to avoid exceeding the chargeback limit.
There are a few things you can do to reduce your chances of exceeding the chargeback limit:
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Use a fraud prevention tool like Kount or FraudLabs Pro to screen orders for fraud before you ship them.
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Offer a strong return policy and make it easy for customers to return items if they're not satisfied.
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Make sure your customers are happy with their purchases by providing excellent customer service.
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Be proactive about resolving any disputes that arise instead of waiting for the customer to initiate a chargeback.
What Are the Consequences of Exceeding the Chargeback Limit?
If you exceed the chargeback limit, your merchant account will be terminated and you will no longer be able to accept credit card payments. This can be devastating for a business, so it's important to do everything you can to avoid exceeding the chargeback limit.
There are a few things you can do to reduce your chances of exceeding the chargeback limit:
-
Use a fraud prevention tool like Kount or Fraud Labs Pro to screen orders for fraud before you ship them.
-
Offer a strong return policy and make it easy for customers to return items if they're not satisfied.
-
Make sure your customers are happy with their purchases by providing excellent customer service.
-
Be proactive about resolving any disputes that arise instead of waiting for the customer to initiate a chargeback.
