Hоw tо Calculate A Chargeback Ratio?

A business’s chargeback ratio is the total number of chargebacks per month divided by the total number of transactions. The dollar amount of the chargeback is irrelevant. As is, in most cases, whether or not you win, lose, or don’t fight the chargeback, once a chargeback has been initiated, it counts as a chargeback. So, suppose your business has 100 transactions in a month and 4 past customers who have initiated a chargeback dispute. In that case, you have a 4% chargeback ratio for that month, depending on whether or not you fight and win those disputes.

Hоw do I kеер Mу Charge-Back Rаtіо Lоw? 

The key is to ensure that you provide every opportunity for a disgruntled customer to contact you directly. When the merchant responds quickly and provides the customer with a full refund in case of dissatisfaction or service failure and endeavors to provide support in case of any future issues, it surely minimizes the chances of chargebacks. It maximizes the customer satisfaction ratio of the company. This indeed adds to the positive growth of the company.

Some specific ideas that our customers have used are:

  • Send confirmation and customer satisfaction emails: When you take a credit card payment, you send an electronic receipt that includes the business contact information. At the end of the month, before the customer receives their credit card statement, send a customer satisfaction email, asking whether the customer was pleased or not, and request them to contact you so that you can resolve their issue and set it right.
  • Receive and refund customer dispute Alert: Several services will alert you if a customer calls their issuing bank to initiate a chargeback and provides you with a 72-hour window to issue a full refund. While we at Quadrapay.com integrate this service into all of our high-risk accounts, you can also obtain similar services from a third party and integrate them yourself. The main advantage of this service is the stability of your merchant account. If you maintain the chargeback ratio within the prescribed limits, you will have a stable account for the long run.
  • When in doubt, send a full refund: If a customer contacts you are complaining about the service and their complaint has some validity, first issue a full refund. Once a full refund has been issued, try to provide an additional service (which the customers would then pay for) to make it right. In doing so, you remove the chargeback potential of the first transaction and better ensure that the customer is happy with the overall service. We have been emphasizing the point of mainly keeping the chargeback ratio at a minimum for account stability.
  • Maintain high transaction counts: Your chargeback ratio is determined by the number of monthly transactions. So a business with only 50 transactions per month is much more at risk of getting shut down by a few rogue chargebacks than one with a few hundred transactions. You can’t simply will your business grow 10 times its current size instantly because it will take a lot of effort and time. However, it’s still an important consideration while balancing the chargeback ratio.