![]() ![]() They set certain limits for a business’ chargeback ratio and the total number of chargebacks received. “High-Risk” Chargeback FeesĬredit card networks have a lot of influence regarding fees for elevated chargeback risk. If a cardholder’s claim loses in arbitration, the issuer may be on the hook for that fee. But, it’s also important to note that arbitration fees are levied against the party which lost the dispute, instead of falling entirely on the merchant. Bringing in the card network means incurring fees that average about $500 per dispute. Let’s say a lengthy dispute reaches the arbitration stage, meaning representatives from the card network (Visa, Mastercard, etc.) have to get involved. And, because the merchant is deemed “at fault” for the chargebacks, these costs are passed off to the merchant in the form of chargeback fees.Ĭhargeback fees resulting from dispute arbitration will be significantly higher than typical chargeback fees. They’re tasked with securely moving funds from account to account and handling all the necessary communication and recordkeeping. Issuers and acquirers both have to pay processing costs, while acquirers must also pay chargeback fees to the card network.Įmployees at the banks, card network, and other payment service providers are busy making it all happen. In short: chargeback fees exist because managing the chargeback process costs time and money.Īs outlined above, each chargeback filed costs the bank time and resources. In most cases, the fee applies even if the chargeback is eventually reversed. To offset these costs, the acquiring bank charges the merchant a chargeback administration fee. ![]() There is overhead that accrues at each step in the chargeback process. Finally, the acquirer pulls funds from your account to recoup their losses. The bank typically refunds the cardholder's money out of their own funds, then debits your acquirer to recover the money. They contact the issuing bank, which initiates a chargeback. Let’s say a cardholder discovers a charge on their monthly credit card statement. The customer has the legal right to request a chargeback under these circumstances. The fee is paid by the merchant and helps cover the bank’s costs involved in settling a chargeback.Ĭhargebacks can be the result of criminal fraud or may be caused by a merchant error. A chargeback fee is a variable amount charged by a bank for each dispute. ![]()
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