All Credit Card Associations and Companies have designed and implemented programs for monitoring chargeback levels at merchants accepting their payment cards. Visa monitors the chargeback activity of all merchants accepting their cards on a monthly basis and alerts the respective merchant bank (also called an acquiring bank or simply an acquirer) when any one of their merchants reaches excessive chargeback levels. Typically, chargeback rates of 1% or greater are considered excessive.
When notified of a merchant with excessive chargeback rates, merchant banks are expected to take adequate steps to reduce the merchant's chargebacks. Remedial actions depend on various factors, including merchant type, sales volume, geographic location, and other risk factors. Often merchants need to provide their sales staff with additional training on card acceptance procedures. Merchants may also be required to work with their merchant banks to develop a detailed chargeback-reduction plan.
Visa may impose financial penalties on merchant banks that fail to reduce their merchants’ excessive chargeback rates. Visa has two chargeback monitoring programs:
- Merchant Chargeback Monitoring Program. The Merchant Chargeback Monitoring Program (MCMP) monitors chargeback levels for all merchant banks and merchants on a monthly basis. If a merchant reaches excessive chargeback rates, Visa notifies the respective merchant bank in writing. MCMP applies to all merchants with more than 100 total transactions per month - sales, credits, etc. - more than 100 chargebacks, and an overall chargeback-to-transaction rate of one percent or greater. First notification of excessive chargebacks for a specific merchant is considered a warning. Visa imposes fines only if remedial actions are not taken within a pre-determined period of time to return chargeback rates to acceptable levels.
- High-Risk Chargeback Monitoring Program. The High Risk Chargeback Monitoring Program (HRCMP) is specifically designed to reduce excessive chargebacks by high-risk merchants. High-risk merchants include direct marketers (mail order and telephone order merchants), travel services, outbound telemarketers, inbound teleservices, and betting establishments. HRCMP applies to all high-risk merchants with more than 100 total transactions per month - sales, credits, etc. - more than 100 chargebacks, and an overall chargeback-to-transaction rate of one percent or greater. Unlike the MCMP, under HRCMP, there is no warning period and fines of $100 per chargeback are imposed immediately if a merchant has an excessive chargeback rate.
Visa also monitors international sales and chargeback rates through its Global Merchant Chargeback Monitoring Program.
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