Chargebacks aren’t just a hassle for merchants. Banks also get hit with processing fees and other charges resulting from the dispute process. In many cases, they pass those fees on to you, the merchant.
Banks operating in the Mastercard ecosystem impose a chargeback fee for every chargeback filed. However, as a card network, Mastercard chargeback fee scales operate a little differently from other brands like Visa.
- Mastercard Issues Guidelines for Managing COVID-19 Chargebacks
- MasterCard DAF: The Dispute Administration Fee, Explained
- Can Mastercard Refund Authorization Mandate Stop Disputes?
- Mastercard Dispute Resolution: What You Need to Know
- The Merchant's Guide to Mastercard Debit Card Chargebacks
- Mastercard Chargeback Time Limits: The 2023 Guide
What are Chargeback Fees?
Chargeback fees are penalties levied against merchants every time a chargeback is filed. Typically, the funds will be automatically removed from your account, along with an additional fee supplied by your acquiring bank. Depending on the circumstances, chargeback fees typically vary anywhere between $5 and $100 per incident.
As mentioned above, chargeback fees are intended to cover any administrative costs incurred due to the chargeback.
In most cases, these fees are non-refundable and must be paid, even if the merchant proves the dispute was invalid through representment. Mastercard chargeback fees are similar to Visa’s in composition and arrangement. However, there are key differences that you should be on the lookout for.Learn more about chargeback fees
What is a Mastercard Chargeback Fee?
As the world’s second-largest card network, Mastercard can make its own rules when it comes to disputes and chargebacks.
If you receive a chargeback from a Mastercard cardholder, the acquirer will pass those charges onto you. They will also tack on any applicable fees as dictated by Mastercard rules. The card network even qualifies specific chargeback reason codes for additional ‘progressive handling fees’ if the bank determines any are required.
Mastercard also imposes fees for the Mastercard Excessive Chargeback Merchant Program. This program exists for “high-risk” merchants who breach network chargeback thresholds. These are added assessments on top of other Mastercard chargeback fees; generally, when discussing Mastercard chargeback fees, we refer only to the fees assessed on a per-chargeback basis.
Chargebacks can wreak havoc on your cash flow and profitability. This FREE paperback book is your guide for preventing chargebacks and, when they happen, fighting them more effectively.Send Me My Free Paperback Book!
Why Does Mastercard Assess Chargeback Fees?
Frankly, Mastercard lets banks assess these fees to cover the cost of administering the chargeback.
Although the terms might seem harsh, Mastercard chargeback fees are not intended to be punitive. The fees are meant to cover any costs that result from handling and processing all those incoming chargebacks.
Each chargeback means the bank has to handle documents, forward them to the merchant, and ensure all documents are routed to the correct party. They must also spend time and energy recovering funds lost to the dispute. All this work takes time and resources.
Remember: banks and card networks deal with thousands of chargebacks daily. Those fees can really add up, so they are passed on to the merchants with whom the liability legally rests. Mastercard’s chargeback fees are intended to cover the cost of doing this added work.
How Much Are Mastercard Chargeback Fees?
It's difficult to say. This is because Mastercard doesn't set any firm requirements for fees in their global chargeback rules. Acquirers have leeway to charge what they and their customers feel is fair.
Mastercard chargeback fees will also be partially dictated by how far the chargeback progresses. Mastercard will impose heavy penalties for chargebacks that advance to arbitration. Other costs could also apply. For instance, there's the Mastercard Dispute Administration Fee, which can be assessed for chargebacks filed in response to intra- and inter-European transactions.
Mastercard chargeback fees can add up quickly as a result. If a merchant chooses to fight back, they could face even more fees, and penalties should things go poorly.
Are Mastercard Chargeback Fees Refundable?
Short answer: no.
Even if you win a chargeback, the fee is not refundable. Some banks offer a form of chargeback protection to merchants willing to opt into their various platforms. Others might even provide “chargeback insurance,” as they call it. However, these protections are not ubiquitous in their coverage.
If a merchant is enrolled in chargeback protection, chargeback costs will still be accrued by the issuing bank, for which the merchant’s acquiring bank will assume responsibility. This way, the fee is still paid, and enrollment fees cover the merchant’s portion.
However, word to the wise: not every chargeback is eligible for chargeback protection.
Mastercard chargeback fees will still apply regardless of perceived liability or the outcome of any dispute. This means that the fee could still stand, even if the chargeback is proven invalid (i.e. a case of friendly fraud).
Mastercard chargeback rules are complex, but you don’t have to become a financial scholar to translate their data. Chargebacks911® is here to help.
Chargebacks911 offers more than a decade of leadership in the chargebacks and payments industry. We are uniquely placed to help you fight back against chargebacks and win. Contact us today for a free demo.