How the chargeback ratio is calculated and why is it important?
A low chargeback ratio is one of the essential parameters which indicates successful business. It should be monitored and controlled by a merchant to avoid threshold breaches set up by card brands, unnecessary fines, penalties, and a bad reputation.
Chargeback ratio is a chargeback-to-sale calculation.
Both Visa and Mastercard calculate the ratio in the same way but using different numbers.
For Visa - the number of chargebacks from the current month is divided by the number of transactions from the current month.
For Mastercard, it’s the number of chargebacks from the current month divided by the number of transactions from the previous month.
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