Chargeback ratio is a measure of how many chargeback claims a merchant pays compared to the total number of transactions the merchant processes.
A chargeback ratio too high can lead to fees or higher costs from acquiring banks, and even the merchant being added to industry “blacklists” like the Terminated Merchant File (TMF) or the Member Alert To Control High-risk list (MATCH list).
Acquiring banks, which process merchant transactions, use these lists to determine which merchants are “safe” to work with, and which aren’t. Chargebacks present a risk to acquiring banks, and these banks work hard and collaborate to avoid merchants with high chargeback ratios.
Card brands like Visa and MasterCard also monitor chargeback ratio and impose strict fines and compliance requirements on merchants who exceed certain thresholds (typically a 100/1, or 1%, chargeback ratio).