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Visa Chargeback Threshold

Visa Chargeback Thresholds

The Visa Chargeback Threshold Changes October 1. Are You Ready?

Have you heard about upcoming changes to the Visa Chargeback Monitoring Program (VCMP) or the Visa Fraud Monitoring Program (VFMP)? If not, you’d better listen up. Otherwise, you may find yourself breaching the Visa chargeback threshold or fraud threshold, and stepping into a world of costly fees and time-consuming red tape.

Visa’s New Dispute & Fraud Thresholds

To understand these changes, you must first know your chargeback ratio (also called your “chargeback-to-transaction ratio,” or “chargeback rate”), and your fraud ratio (or “fraud rate”). These are two separate figures; your chargeback ratio measures the number of total transactions resulting in chargebacks. Your fraud ratio, on the other hand, looks at the total dollar value of your transactions lost to fraud during the specified month.

To calculate your chargeback rate, Visa uses the following formula:

Visa takes the number of chargebacks in a single month, then divides that figure by the total number of transactions in the same month.

visa ratio
chargeback rate

 

Visa’s thresholds have been standard for a long time. However, with the implementation of Visa Claims Resolution and other antifraud and chargeback measures, the company expects that merchants should have a lower overall number of incidents. So, effective October 1, 2019, Visa’s fraud and chargeback standards are going to get a bit more challenging. The company is also changing the  chargeback program's name from "Visa Chargeback Monitoring Program" to "Visa Dispute Monitoring Program," so as to better-reflect changes made under Visa Claims Resolution.

These are the new “lines in the sand” that you can’t cross:

Visa Fraud Monitoring Program

Old Monthly Threshold New Monthly Threshold
VFMP Early Warning 0.75% of sales
and $50,000
0.65% of sales
and $50,000
VFMP Standard 1.0% of sales
and $75,000
0.9% of sales
and $75,000
VFMP Excessive 2% of sales
and $250,000
1.8% of sales
and $250,000

Visa Dispute Monitoring Program

Old Monthly Threshold New Monthly Threshold
VDMP Early Warning 0.75% chargeback ratio
and 75 chargebacks
0.65% chargeback ratio
and 75 chargebacks
VDMP Standard 1% chargeback ratio
and 100 chargebacks
0.9% chargeback ratio
and 100 chargebacks
VDMP Excessive 2% chargeback ratio
and 500 chargebacks
1.8% chargeback ratio
and 1,000 chargebacks

Close to the Edge?

If you’re in danger of breaching the Visa chargeback threshold, there’s not a second to waste. Click below to start reducing your chargeback issuance today.

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The Consequences of Violating Thresholds

If you violate the Visa fraud or Visa chargeback threshold, you may be forced to enroll in either the Visa Dispute Monitoring Program or Visa Fraud Monitoring Program.

As their names imply, these are two separate programs administered by Visa. Their purpose is to help merchants manage their fraud and chargeback risk. In turn, this helps monitor the level of risk individual merchants represent to the overall payments environment.

Both the VDMP and VFMP are divided into “standard” and “excessive” programs, based on your risk level.

Visa Dispute Monitoring Program

The standard VDMP has an enforcement period of eight months. During the first three months of that period, Visa will fine your acquirer $50 for every dispute filed against you, which your acquirer then deducts from your account. For merchants whose chargeback problem is considered “excessive,” (i.e. significantly above the Visa chargeback threshold), the duration is 12 months. You’re also subject to a $100 per-dispute fee from the beginning.

To top it off, in both the regular and the excessive program, you’re subject to a $25,000 review fee toward the end of your eight-month enforcement period.

Visa Fraud Monitoring Program

The standard VFMP also has an enforcement period of 8 months. While there are no fines for the standard VFMP, you do not enjoy the fraud liability protection offered by 3-D Secure. Instead, Visa will automatically assign you liability for fraud-related disputes (reason code 10.5 under Visa Claims Resolution). Like the VCMP, excessive fraud merchants have a 12-month program, and they receive costly non-compliance fees for every month they breach the acceptable threshold.

What Does This Mean?

The bottom line: fraud and chargebacks are not going away, but your margin of error is getting smaller than ever. It’s easier to breach the established Visa dispute threshold or fraud threshold and end up in the VDMP or VFMP. Not only will this inflate your costs…it could destroy your business entirely.

Remember that, as a merchant, you’re not the only party who holds responsibility for chargebacks. When customers or their issuing banks file disputes, Visa first overturns the transaction from your acquirer. In turn, your acquirer then withdraws the money from your account to cover their loss.

The 2019 Chargeback Situational Field Report

The 2019 Chargeback Situational Field Report is a comprehensive report offering a cross-view of the state of chargebacks and chargeback management in card-not-present payments.

Free Download

Acquirers understand that some chargebacks are unavoidable. That said, standard acquirers and processors don’t want to do business with merchants who receive excessive chargebacks. Acquirers often cut these merchants off, freezing or canceling their accounts before they even breach thresholds.

If your merchant account is frozen or canceled, that leaves you unable to process card payments. You will be unable to accept new transactions or withdraw funds. You’re essentially dead in the water. That’s why it’s more important than ever that you take steps to minimize your risk exposure and try to prevent as many attacks as possible.

Take Steps Against Chargebacks & Fraud

We recently offered some recommendations to ensure you’re covering your bases in our fraud prevention tools roundup, so check that out. These strategies will mitigate your criminal fraud risk…but that still leaves chargebacks to manage.

Chargeback data suggests between 60-80% of all disputes are friendly fraud. Also, because friendly fraud is post-transactional in nature, there’s no reliable way to prevent these attacks.

Friendly fraud is on the rise, while the Visa chargeback threshold is getting lower. It’s not fair…but it’s reality. That’s why your best option is to eliminate the possibility of merchant error wherever possible, then deal with friendly fraud through representment.

Have additional questions about the new Visa chargeback threshold or fraud threshold? Do you need help bringing your chargeback ratio down fast? Click below and find out how to lower your chargeback issuances today.


Prevent Chargebacks.

Fight Fraud.

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