Mastercard Chargeback ThresholdHow many Mastercard chargebacks are too many?

Worried About Breaching the Mastercard Chargeback Threshold? How to Tell if You’re Compliant

Mastercard doesn’t care why you’re receiving chargebacks. From their perspective, they see a high number of chargebacks as a sign of a risky merchant, so when you receive an excessive number of them, they start to take notice.

…but what exactly does Mastercard consider to be “too many” chargebacks?

Like other card networks, Mastercard maintains its own preset monthly limit for the number of chargebacks that they consider “acceptable.” Merchants and banks commonly refer to this limit as the Mastercard chargeback threshold.

The limits are not arbitrary numbers that you can simply ignore. You have to track key performance indicators (KPIs) to gauge how effective you are at chargeback prevention. Plus, breaching the Mastercard chargeback threshold carries serious consequences. Noncompliance could lead to hefty fees and restrictions. If you’re not careful, your Mastercard chargeback rate could put your whole business in danger.

What is the Mastercard Chargeback Threshold?

First, we need to make this clear: there is no single Mastercard chargeback limit. Instead, there are two tiers of Mastercard chargeback limits, based on the specifics of your business.

The Mastercard Excessive Chargeback Merchant program is split into two categories: Excessive Chargeback Merchant (ECM) and High Excessive Chargeback Merchant (HECM).

If your chargeback rate exceeds 1.5%, and you see more than 100 chargebacks per month, you’d qualify as an “excessive chargeback merchant,” and would get put int eh ECM program. But, if your chargeback rate exceeds 3% of transactions and you see more than 300 chargebacks per month, then you’d qualify for the HECM program.

Program Level	Number of Monthly Chargebacks	Monthly Chargebacks (% of Total Transactions)
Excessive Chargeback Merchant Program	100 to 299	1.5% to 2.99%
High Excessive Chargeback Merchant Program	300 or more	3% or more

Why Does Mastercard Impose This Limit on Merchants?

The goal here is for Mastercard to protect themselves and mitigate risk. They also want to ensure that your sales tactics are ethical and that your methods and technology are compliant with card network protocols. Other card networks like Visa have their own preset chargeback limits as well.

A high dispute ratio can indicate problems with product or service quality or customer service, or it might be a sign of actual fraud. That’s why this indicator can impact your relationship with payment processors, banks, and even customers. Keeping this figure low is important to maintain good standing with banks, and avoiding financial losses or operational complications.

Penalties for Exceeding the Mastercard Chargeback Threshold

Being categorized under either level of the Mastercard ECM program will substantially increase the fees you incur for processing payment cards. The fines for both tiers of the program escalate in accordance with the duration you continue to exceed the Mastercard chargeback limits:

Number of Months Above ECP Thresholds	Assessment if ECM in Violation Month (100-299 Chargebacks and 150-299 Basis Points)	Assessment if High Excessive (HECM) in Violation Month Chargebacks and Greater than 300 Basis Points)
	Violation Assessment	Violation Assessment	Issuer Recovery Assessment
1	0	0	No
2	EUR/USD 1,000	EUR/USD 1,000	No
3	EUR/USD 1,000	EUR/USD 2,000	No
4 to 6	EUR/USD 5,000	EUR/USD 10,000	Yes
7 to 11	EUR/USD 25,000	EUR/USD 50,000	Yes
12 to 18	EUR/USD 50,000	EUR/USD 100,000	Yes
19 +	EUR/USD 100,000	EUR/USD 200,000	Yes

Mastercard has strict reporting protocols for program merchants. They expect acquirers to submit a thorough monthly account of each merchant’s standing, with charges ranging from $50 to $300 for each report. The bank will redirect these costs to you, often with a significant markup. And, if these reports are late, then fines can escalate fast; up to $1,000 daily for each missing report.

If you’re in the program for over six months, Mastercard may direct your bank to undertake a comprehensive review, or develop a corrective strategy. This will cost thousands of dollars. And again, there’s a good chance that you’ll end up bearing the financial brunt of these measures.

After a full year, the acquirer will be facing severe non-compliance penalties; up to $50,000 monthly. Of course, given the cost and the threat posed, most will simply opt to terminate their relationship with you before you become a liability at that scale.

Account Frozen or Closed Due to Mastercard Chargeback Rate

Like I mentioned above, if your chargeback or fraud rate approaches Mastercard’s critical threshold, your bank may take preemptive measures to shield their interests. They may freeze your account, for instance. In a best-case scenario, this action temporarily restricts your access to the capital you need for essential operations.

In more extreme cases, the bank may opt to sever ties entirely and terminate your account. If this happens, the bank will have to add you to the MATCH List. This is a blacklist of merchants who’ve had accounts terminated due to chargeback or fraud risk. Being MATCHed will make it almost impossible to secure another standard processing agreement.

Also, bear in mind that simply bringing your diapute rate under the Mastercard chargeback threshold doesn’t mean you’re immediately in the clear. Once you’re in the ECM program, you’ve gotta stay below the designated limit for three consecutive months before Mastercard will consider you “compliant.”

Protect Your Business Against Mastercard Chargebacks

So, what can you do to protect your business long-term?

First, note that as many as three out of four chargebacks are probably cases of first-party (or “friendly”) fraud. This means they were filed without a valid reason. You have the right to challenge these invalid chargebacks through the representment process. If you fight a customer dispute and win, you can recapture a portion of the amount disputed.

Unfortunately, even a successful representment can’t undo the impact of a dispute on your chargeback ratio. This is because chargeback rates are calculated using the total number of chargebacks issued, regardless of whether they get reversed later. That’s why it’s crucial that you do everything possible to prevent chargebacks before they happen.

Maintaining an “accetable” chargeback rate means implementing a comprehensive strategy that addresses chargebacks directly at their source. The good news is that the experts at Chargebacks911® are here to help.

Chargebacks911 offers the industry’s only fully managed approach to chargebacks, deploying machine learning and human forensic expertise to help you stop chargebacks and protect your revenue. Contact us today and learn how much you stand to save.