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How to Calculate Dispute Ratio to avoid Chargeback?

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If you are a merchant and want to understand the Chargeback Ratio then you should read this article to the end. We have covered the basic details and slowly moved towards the intrinsic details of the Chargeback Ratio. You will also get steps to Calculate Dispute Ratio to avoid Chargeback.

What is Chargeback Ratio and Chargeback Rate?

It is simply a ratio of a number of chargeback to a number of transaction in a span of a month, which is calculated by the business owner. And then, we multiply this chargeback ratio with 100 and get the chargeback rate. In order to run a profitable business, the merchant should know about the Chargeback ratio and Chargeback rate, and try to reduce the number of chargebacks and the chargeback ratio as a whole.
In addition, a merchant with high chargeback ratio or chargeback rate in their transaction is considered as owning the high-risk business. The chargeback of each merchant is inspected on monthly basis.
So, with keen eyes on your dispute ratio, you can avoid any penalties.
If you need help with your business to reduce chargeback rate then contact Chargeback Expertz at the toll-free number. Furthermore, our team of experts will help you Calculate Dispute Ratio to avoid Chargebacks. Also, you can get effective steps if you wish to go for Chargeback Representment.

How to Calculate Dispute Ratio to Avoid Chargebacks?

Well, it is very easy to calculate your monthly Chargeback Ratio or Chargeback Rate. But there are few things to keep in mind when calculating the Dispute Ratio.
The Visa and MasterCard use different methods to calculate the chargeback ratio. We will help you with both the methods with the most noteworthy examples.
Formula:
Chargeback Ratio = No. of Chargebacks in a month/ No. of Transactions in a Month
Chargeback Rate = (No. of Chargebacks in a month/ No. of Transactions in a Month)*100

Visa’s Method to Calculate Dispute Rate
Visa takes the number of chargeback of this month and divides it with the transaction of the same month to calculate the Dispute Ratio.
Let’s take an example of a Merchant and Calculate the Chargeback Rate:

Merchant Month No. of Chargeback No. of Transaction Visa Chargeback Rate
A April 25 17,820 0.14%
B December 34 15,650 0.21%

Therefore, you can see that the Merchant A has 0.14% Chargeback Rate and Merchant B has 0.21% Chargeback Rate.

Mastercard’s Method to Calculate Dispute Rate
Now, the Mastercard uses a different method to calculate the Chargeback Ratio for the merchant. It takes the number of chargebacks of this month and divides it with the number of transaction of the previous month.
Let’s understand it with the help of an example.
These are the details of the Chargeback of Merchant A:

Month No. of Chargeback No. of Transaction Formula Chargeback Ratio
May 60 12,000
June 65 13,250 (65/12000)*100 0.54%

In this case, you can see in the above table, the Chargeback Rate of Merchant A in the Month of June is 0.45% which depends on the month of May.
These are the details of the Chargeback of Merchant B:

Month No. of Chargeback No. of Transaction Formula Chargeback Ratio
August 150 15,000
September 25 17,750 (25/15000)*100 0.17%

In this case, the Merchant B has comparatively less chargebacks in the month of September. But the chargeback rate depends on the transaction done in the month of August, which affects the Chargeback ratio and the Chargeback rate.

What happens when you Exceed the Threshold Chargeback Rate?

Firstly, there is a Fraud Monitoring Program that keeps their keen eye on the different frauds going on in the name of the Chargeback. The threshold Chargeback Rate for the Merchant is almost 1% for a month.
If the Business owner exceeds this limit, they are put under the fraud monitoring program. After that, if they do not reduce the ratio by the next month, they are fined under the penalty act. Furthermore, the Merchant can be refused from making any transaction in the future.
Keep track of your chargeback and then calculate Dispute Ratio to avoid Chargeback. In case you are facing such issues and looking for guidance then contact the Chargeback Expertz. Hence, we provide you with expert tips on Chargeback Representment. Also, our experts are 24/7 available for you, just place a call at the toll-free support number.

What are the Effects of Chargeback Ratio on your Business?

As we discussed that chargebacks affect your business in many ways and that you need to calculate Dispute Ratio to avoid chargebacks in order to run a profitable business, you must also keep in mind that not everybody uses the same measures to process the chargeback ratio. Moreover, different card brands use different techniques to deal with the disputes.
In conclusion, if you do not handle your chargeback very well, you can be subjected to a series of penalty that would risk your business. Here is how ignoring your chargeback activity affects your business:

  • Firstly, you will be given a warning to minimize the number of chargebacks.
  • Then you will be given the time periods to show that you have reduced the number of chargebacks.
  • If you are unable to reduce them you will be subjected to fine until you show a decrement in the number of chargebacks. Now your business will also be considered as high-risk business.

Consequently, to avoid such effects you need effective guidance, which you can get by placing a call at the toll-free number of Chargeback Expertz. Moreover, the chargeback specialist will help you to Calculate Dispute Ratio to avoid Chargeback and provide you with tips to make your business more profitable.

How to Maintain Minimum Dispute Ratio?

If you wish to avoid any penalty, you need to maintain a minimum ratio. For that, you can follow these step.

  • Calculate Dispute Ratio to avoid Chargebacks
  • Maintain a healthy relationship with your customers
  • Get as much knowledge about the chargeback as possible
  • Keep your products and services genuine
  • Deliver on time
  • Get an expert to handle the chargebacks

You can contact the Chargeback Expertz and get tips for Chargeback Representment. We have a toll-free number and you can also chat with us via Chat-box.

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