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The Chargeback Fee: An Unnecessary Loss of Revenue

Chargeback Fees

Chargeback Fees Can Seriously Jeopardize a Business’s Longevity—But the Threat is Unnecessary

For each chargeback issued, the acquirer will charge the merchant a nonrefundable chargeback fee.

Depending on the number of chargebacks a merchant experiences, these chargeback fees can become a very serious threat to the wellbeing of a business. They can also lead to other, even greater challenges, down the road.

What is a Chargeback Fee?

Acquiring banks assess a fee for each chargeback filed against a merchant. This fee is meant to cover the administrative costs associated with the chargeback process.

There are a few different factors that help determine the cost of the fee, including the acquiring bank, the processing agreement and the kinds of goods or services which the merchant offers. On average, the fees typically fall somewhere between $20 and $50. However, merchants who have earned the label of “high risk” can expect to pay much more.

While these fees may not seem particularly daunting at first glance, they add up very quickly.

According to the 2015 True Cost of Fraud study, each dollar of fraud actually costs the merchant $2.23. That means, a $100 chargeback results in more than $223 in loses when fees are added in.


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A Non-Refundable Fee

All chargeback fees assessed by the acquiring bank are non-refundable. Even if the merchant disputes the chargeback, wins the case and recovers lost revenue, the fee won’t be refunded. Once a chargeback has been filed, the damage has been done.

Therefore, it’s in the merchant’s best interest to prevent chargebacks before they happen. There are various ways to do that.

Adhere to Business Best Practices

Chargeback guidelines are regularly updated. Merchants need to remain vigilant about monitoring regulations and always adhering to business best practices.

However, despite a merchant’s best intentions, mistakes can happen. Errors and oversights cause needless chargebacks. That’s why Chargebacks911 created the Merchant Compliance Review. We start by providing a 106-point inspection of a business’s policies and procedures. After identifying potential chargeback triggers, we work with the merchant to implement the necessary changes.

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Chargebacks caused by merchant error account for a significant portion of all transaction disputes—as much as 40%. By eliminating these errors, merchants can avoid chargebacks and the accompanying fees.

Stop Affiliate Fraudsters

Besides adhering to business best practices, merchants who engage in affiliate marketing can also guard against chargeback losses with the help of Chargebacks911’s Affiliate Fraud Alerts™.

Affiliate Fraud Alerts™ helps merchants identify unscrupulous affiliate marketers who use unethical sales practices to generate unearned commissions. When cardholders realize they’ve been victimized by affiliate fraudsters, they file chargebacks—ultimately turning the merchant into the victim.

By identifying and preventing affiliate fraud, merchants can reduce CPA expenses, avoid chargebacks, and prevent unnecessary chargeback fees.

Receive Alerts

Chargeback alerts are a simple and effective tool for chargeback prevention. When cardholders dispute transactions due to criminal fraud, participating issuers will alert the merchant. The merchant has the chance to refund the cardholder before a chargeback is issued.

Chargebacks911 offers the broadest chargeback alerts network on the market, partnering with more issuing banks than any other service provider. Contact us today to learn more about the alerts provided by Chargebacks911.

Chargeback Monitoring Programs Fees

Card networks instruct acquirers to identify merchants who fail to keep chargeback rates in check, as well as  high-brand risk merchants, and enter them into a chargeback monitoring program.

Enrollment in these chargeback monitoring programs includes a monthly fee. Certain merchants with applicable, “low risk” MCCs might receive a grace period before becoming fee eligible. This “workout period” allows the merchant a chance to solve their chargeback issues before fees are assessed.

However, high-risk merchants are usually fee eligible as soon as they enter a chargeback monitoring program.

Networks also conduct periodic reviews of the merchant’s mitigation plan. Each review is accompanied by a fee.

Merchants who fail to reduce their chargeback rate, despite enrollment in a chargeback monitoring program, could face very serious consequences. In most cases, the acquirer will close the merchant’s account, rendering them unable to accept payment card transactions.

These programs are designed to encouraging merchants to reduce chargeback issuances; however, a chargeback monitoring program is a very expensive solution. Again, it is much more affordable to prevent chargebacks before they become a major problem.

Chargeback Fees…Just One More Unnecessary Expense

Most merchants assume chargebacks are simply a cost of doing business. To them, the chargeback fee is just another expense that must be dealt with.

In reality, chargebacks are preventable. All chargebacks, and the accompanying fees, needlessly steal revenue.

Contact Chargebacks911 today to learn more about our comprehensive chargeback remediation services. Don’t lose another dime to chargebacks.


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1619    Chargebacks 101    

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