Mastercard ECM Program: How to Calculate Your Mastercard Chargeback RateA Primer on Your All-Important Chargeback Ratio
Why Your Chargeback Rate Matters
Your monthly chargeback rate is not just another key performance indicator. It’s a crucial data point that will either keep you out of — or lock you into — Mastercard’s Excessive Chargeback Merchant program.
Like we covered in the last chapter, program eligibility for both the ECM program and the HECM program is determined on a monthly basis by looking at two factors. First, the raw number of chargebacks you got in a given month. Then, you need to calculate your chargeback-to-transaction rate for the month in question, as well.
If we’re talking about the number of chargebacks you experience per month, that figure is pretty self-explanatory. It gets a little more complicated when we look at your chargeback ratio, though.
You need to know how to track your Mastercard chargeback rate correctly. Otherwise, you could end up facing added fees and restrictions on your account. So, in this chapter, I’ll break down the criteria Mastercard uses to calculate your chargeback ratio. That way, you’ll always know precisely where you stand.
Determining Your Mastercard Chargeback Rate
Your chargeback ratio is the measure of your chargebacks as a percentage of monthly transactions. Mastercard takes your total monthly transactions and divides them by total monthly chargebacks; but, they compare your chargeback issuances in the current month to the number of transactions processed in the previous month.
For example, if you submit 10,000 Mastercard transactions for processing in April, but end up getting hit with 90 chargebacks in May, then your Mastercard chargeback ratio for May is 1%.
Why You Need to Violate Both Limits for Program Inclusion
Remember: you must exceed both of the thresholds outlined in the last chapter before you risk enrollment in either the ECM or HECM.
For instance, if 5% of your transactions result in chargebacks, but you receive only 50 chargebacks a month, then you’re still in the safe zone. That’s because you’re below the monthly chargeback issuance threshold for the standard Mastercard chargeback monitoring program (100 to 299 chargebacks per month).
Or, let’s say you submit 100,000 Mastercard transactions for processing each month, and 500 of them result in a chargeback. Even though you experience a high monthly quantity of chargebacks, your chargeback ratio is an acceptable 0.5%. Because you didn’t exceed both thresholds simultaneously, you won’t be placed in a Mastercard merchant monitoring program.
