Understanding the Chargeback to Transaction Ratio

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High Risk Merchants & Chargebacks

High-risk merchants are frequently categorized as such because of their Chargeback to Transaction Ratio (CTR). According to Visa and MasterCard regulations, if the CTR of a merchant exceeds a threshold of 1%, measures need to be taken in order to mitigate the chargeback risk.

Card holders file chargebacks for a variety of reasons. Some of the chargeback reasons are legitimate, while others are not. A merchant, particularly one that is or can become high-risk, needs to have a good understanding of chargeback reasons. Merchants that sell branded clothing, jewelry, travel, and services that are paid recurrently or delivered electronically should be particularly vigilant when it comes to their CTR.

Reasons for Chargebacks

The most obvious, yet not necessarily the most frequent chargeback reason, is when the cardholder has their card information compromised, allowing a third-party to process fraudulent transactions.

Cardholders who initiated the transaction may subsequently file a chargeback because the products and services were either not delivered or not as described by the merchant. Sometimes the chargeback results from a misunderstanding; the customer may not comprehend the terms of recurring payments or they may have misread the specifications of what they were buying.

According to a study conducted in late 2014, the most common type of fraud that leads to chargeback is friendly fraud (over 80%). This type of fraud describes the situation when the actual owner of the card placed the transaction, but they challenge it despite the fact that the delivery had been made. This may occur either because the customer forgot about the transaction, or because they wish to obtain an illegitimate benefit.

Irrespective of whether the chargeback reason is legitimate or not, it is extremely important to keep the CTR below 1%. If a merchant goes over the threshold of 1%, it can be subjected to penalties and extra fees. Additionally, it will be included in special monitoring systems until the chargeback rate goes below the acceptable threshold.

What is Your Chargeback to Transaction Ratio?

In order to determine the CTR, Visa and MasterCard will divide the total number of transactions of the previous month by the number of chargebacks of the current month. If the ratio exceeds 1%, and the merchant registers over 100 chargebacks monthly, Visa will include the merchant in the Merchant Chargeback Monitoring Program. Similarly, MasterCard will include the merchant in the Excessive Chargeback Merchant Program if the merchant has a CTR higher than 1%, and the number of chargebacks exceeds 50 per month, for two consecutive months. If the merchant has its chargeback rate reduced, it will be removed from these programs.


Many high-risk merchants have had their services terminated by payment processors because of increasing chargeback rate.

It’s important to work with a payment processor that understands how to prevent chargebacks.  And fight them when they do occur.

The best approach to handling chargebacks is not to have them in the first place. This is why sophisticated, efficient fraud prevention techniques are available to all merchants.

Are you a high risk merchant that seeking effective solutions to chargebacks?

Contact info@paynetsecure.net today

High-risk merchants often establish more than one payment processing account to protect business operations. Load balancing multiple accounts on a single gateway is the smart way to manage all accounts.

Benefits of Load Balancing 

  • Increase your productivity, getting rid of duplicate administrative tasks.
  • Make reconciliation simple.
  • Reduce costs and streamline operations.
  • Respond rapidly to constantly changing conditions in the market.
  • Take control of chargeback ratios.

A payment gateway with load balancing allows you to distribute transactions between more than one acquiring bank.  You view and manage all accounts from a central control panel.  Account management, account reconciliation, and reporting are simplified.

Successful Payment Processing Management

Picture the agony of running your transactions through separate payment gateways. Different logins. Different transactions going through different accounts. Administration, customer service, accounting, and report generation is a nightmare.

When you load balance accounts on a single gateway, life gets easier. Your business runs smoother.

Having an organized, productive means of managing your payment processing is vital to your success as a company. A payment gateway increases your efficiency. As you run multiple high risk merchant accounts through a centralized panel, your transactions can be managed and viewed individually or globally from the central payment gateway control panel.

Additionally, load balancing transactions on a payment gateway can be either manually or dynamically configured, giving you the flexibility to maximize the capabilities of each acquiring bank or processor.

Right Fit for High Risk Payment Processing 

High risk payment processors are not all the same. One provider might call you high risk. Another might not. The difference in how you’re viewed is a result of varying underwriting guidelines. The stricter the guidelines, the more likely you are characterized as a high risk merchant. The looser the guidelines, the more quickly you’ll find yourself with a merchant account. Your best bet is to find a provider that specializes in high risk merchant services.

Shopping for the Best Payment Gateway

As you begin your search for a payment gateway, it’s important to understand what’s out there. Companies with both domestic and offshore merchant services must make sure that acquiring banks can be accommodated. No matter where and/or how the transactions are processed, it’s important that all transactions flow through a single network connection.

A business accounting system, such as QuickBooks, with integrated payment gateway is essential to facilitate your accounting functions. Such a system will also speed the transition of transaction data through the internal systems.

Making sure that the service allows multiple levels of authentication and permission access control is also important. As a way to protect your business against insider fraud, these multiple levels safeguard against misuse by vendors and employees or anyone else who might have access to the system.

Determining that the service includes a reporting function is important as it allows you to track transactions. With complete auditing passageways, you can guarantee the system’s validity. You’ll also want to be certain any high risk merchant account payment gateway you find includes tools to fight fraud. Protective security measures will help you know whether or not a transaction is validated. Having such fraud-fighting mechanisms in place will facilitate the legitimate transactions, thwart the fraudulent once and increase your profit margins.


Managing multiple high risk merchant accounts on a single gateway is a major inconvenience.  Time consuming and ineffective.

A smarter way to use a single high risk processing gateway.  

  • Access all accounts through a single login
  • View and manage accounts globally or individually  
  • Simplify accounting, customer service and management 
  • Load balance among accounts to mitigate processing risk 

Do you want to simply management of multiple high risk merchant accounts?

Contact info@paynetsecure.net today