What are the card brand monitoring programs?
Each credit card company has a set of rules and regulations that merchants must be familiar with. It is expected by these credit card companies that by accepting their brands for payment of your goods you will comply with their system of rules and regulations. This is done to ensure that the credit card brand, for example Visa or MasterCard, is not jeopardized and that as a merchant you’re conducting yourself in a professional manner.
As part of these rules and regulations, each major credit card company has its own chargeback monitoring program. Each program is slightly different, but the goal is to carefully monitor merchants and your chargeback ratio/threshold. These credit card chargeback monitoring programs are often used to identify and monitor high-risk merchants and ultimately to help merchants improve the sales process to limit chargebacks.
To help you understand how these chargeback monitoring programs work, we’ve taken a closer look at the programs used by Visa and MasterCard. We urge you to fully review and comply with all documentation provided by your credit card company. These rules/regulations documents are constantly changing, and it is your responsibility as a merchant to make sure you’re up-to-date with latest changes.
Visa Chargeback Monitoring
Visa clearly states in their guide titled: Chargeback Management Guidelines for Visa Merchants that “monitoring chargeback rates can help merchants pinpoint problem areas in their businesses and improve prevention efforts”.
Along with the details and guidelines in their chargeback guide, Visa has some general recommendations for monitoring chargebacks, including:
- Track your chargebacks based on reason codes.
- Track your chargeback activity as part of your overall sales.
- Track card-present and card-not-present chargeback data separately.
Visa monitors your chargeback activity on a monthly basis and will notify your acquirer of any excessive chargebacks. The onus is on the acquirer to work with you to help reduce your chargeback activity. Visa clearly states, “Merchants should work with their acquirer to develop a detailed chargeback-reduction plan which identifies the root cause of the chargeback issue and an appropriate remediation action(s).”.
As a merchant, you need to be aware of and understand Visa’s three chargeback monitoring programs:
- Visa Merchant Fraud Program. This program monitors chargeback activity for all merchants and acquirers monthly. If a merchant exceeds defined chargeback thresholds, your acquirer is notified in writing with a warning. If after this first warning actions are not taken to solve the problems and lower chargeback rates to the specified levels, Visa may apply financial penalties to the merchant’s acquirer.
- High Brand Risk Chargeback Monitoring Program. This program is targeted directly at reducing chargebacks for high-risk merchants. Read the Visa Core Rules and Visa Products and Services Rules guide for details on the high-risk merchant category codes.
- Global Merchant Chargeback Monitoring Program. This program applies when you meet or exceed specified international chargeback thresholds. As with the Visa Merchant Fraud Program, your acquirer is notified when you exceed these thresholds and you are expected to work with you acquirer to remedy these excessive chargebacks.
This is a very brief summary of Visa’s chargeback monitoring program, and we urge you to read Chargeback Management Guidelines for Visa Merchants and Visa Core Rules and Visa Products and Services Rules to make sure you’re up-to-date with the latest Visa chargeback guidelines, thresholds, reason codes, and monitoring programs.
MasterCard Chargeback Monitoring
MasterCard analyzes and reviews chargeback activity with its Excessive Chargeback Program. We recommend you watch the special training series designed by MasterCard to learn how the Excessive Chargeback Program works.
As part of this program, MasterCard expects your acquirer to monitor your chargeback activity, and to act when your chargeback levels reach or exceed defined chargeback threshold rates. Your chargeback threshold rate is based on the following calculation: current month’s chargebacks divided by last month’s chargebacks equals your chargeback ratio/threshold. It’s very important for you to also monitor your chargeback activity and to keep close attention on your chargeback ratio.
The MasterCard Excessive Chargeback Monitoring Program has two categories:
- Chargeback Monitored Merchant. If your chargeback activity exceeds a 1% chargeback ratio, you are entered in this program. (Note: this threshold is based on where your acquiring bank is located. Make sure you know what the thresholds are for your specific region/acquiring bank.)
- Excessive Chargeback Merchant. If your chargeback ratio is at 1.5% and if you’ve been at this threshold level for two months, you’re entered in this program. There are two tiers within this category; we urge you to watch the Excessive Chargeback Programs video to understand how these work.
Along with watching the Excessive Chargeback Program video, take advantage of the documentation on the MasterCard website.
Learning More About Chargeback Monitoring Programs
We cannot state it enough: it’s very important for you to read the documentation provided to you buy your credit card company. Make sure you know what the chargeback thresholds are and how these apply to your business. Be sure you’re communicating with your acquirer about your chargeback ratio and know when your numbers are not looking good.
As always, the Verifi team is here to help you. We can provide recommendations and guidance on chargeback monitoring solutions such as CDRN and Order Insights to help you stop chargebacks from occurring.