A chargeback fee is charged by your acquirer every time you receive a chargeback. This fee compensates the acquirer for administrative work involved in processing the chargeback. It also serves as a sort of punishment — a penalty levied against you for allowing the chargeback to happen.
Each acquirer sets their own rate for the chargeback fee, usually in the range of $20 – $50 each.
The AltoShield suite of chargeback prevention solutions can proactively resolve payment disputes, saving you from expensive and damaging chargeback fees.
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Chargeback fees can have a significant impact on your business. It’s important to make sure you understand these costs — and how to avoid them.
Who has to pay chargeback fees?
If you accept credit and debit cards as a form of payment, you are susceptible to chargebacks — and the corresponding chargeback fee.
Fees are automatically deducted from your merchant account each time a chargeback is filed.
How much is a chargeback fee?
Chargeback fees vary depending on the acquirer. They can even vary from one merchant to another at the same acquiring bank.
Usually, fees are between $20 and $50. The highest fees are typically assigned to high-risk merchants.
High-risk merchants receive this classification because they operate in industries with elevated exposure to fraud, chargebacks, regulatory scrutiny, or reputational issues — all of which pose a threat to the processor or acquirer. Because processors and acquirers are exposing themselves to potential financial losses, they often increase processing fees — including chargeback fees — as a form of insurance or protection.
If you aren’t sure what your chargeback fee is, check the merchant agreement you signed when your account was approved. You can also find your chargeback fee on your monthly processing statement.
How do monitoring programs impact chargeback fees?
The card brands (Mastercard, Visa, etc.) have chargeback monitoring programs — formal merchant observation processes that are implemented when your risk metrics breach established thresholds.
If you are enrolled in a monitoring program, you could be charged monitoring program fees. These fees are in addition to your standard chargeback fee.
NOTE
Chargeback fees are usually deducted from your merchant account in tandem with the chargeback — the chargeback amount is withdrawn from your account followed by the chargeback fee.
Alternately, monitoring program fees are usually tallied throughout the month and debited from your account in one lump sum. Depending on how many chargebacks you receive, which threshold you’ve breached (Visa or Mastercard), and how long you’ve been in the program, these fees could be thousands of dollars each month.
Enrollment in a monitoring program is very costly. It is best to exit as quickly as possible. Chargeback prevention solutions like alerts and RDR can help. Check our detailed guides to learn more.
Are chargeback fees refundable?
Chargeback fees are not usually refundable. Even if you fight the chargeback and win — proving the dispute was invalid and shouldn’t have happened — the chargeback fee won’t be returned.
Cost wise, it doesn’t matter if a chargeback is valid or invalid. Because the acquirer fulfilled its obligations and processed the chargeback, the fee stands.
How can I avoid chargeback fees?
The only way to avoid a chargeback fee is to avoid the chargeback that triggered it.
A well-rounded chargeback prevention strategy includes two components:
- Updating your policies and procedures to reduce the risk of customer dissatisfaction.
- Implementing available tools to resolve disputes before they progress to chargebacks.
This resource explains the steps you can take to improve the customer experience: A Merchant’s Guide to Preventing Chargebacks
And these resources explain the available chargeback prevention tools: prevention alerts, Rapid Dispute Resolution (RDR), and Order Insight.
If you’d like help upgrading your chargeback prevention strategy to reduce costs and optimise ROI, reach out to the AltoShield team today.
