If you’re a business owner dealing with card payments, especially in high-risk industries like CBD, adult content, coaching, supplements, or dropshipping, then you’ve probably heard about “chargeback ratios.”
Maybe your processor warned you about keeping your ratio low. Or maybe you were placed under review because your chargebacks went up. But what exactly is a chargeback ratio? Why does it matter so much? And how high is “too high” in 2025?
Let’s break it all down. In this article, you’ll learn:
- What is a chargeback ratio?
- How is it calculated?
- What’s considered acceptable in 2025?
- What happens if you go over the limit?
- And most importantly, how to bring your ratio down?
What is a chargeback ratio?
Your chargeback ratio is a number that shows how many chargebacks you have compared to the number of total transactions you process.
It’s usually shown as a percentage. For example:
- If you processed 1,000 transactions last month
- And got 10 chargebacks
- Your chargeback ratio is 1%
It sounds simple, but there’s one thing to know: processors may calculate this differently. Some use the number of transactions (Visa), while others use volume in dollars (Mastercard). Some count only the current month. Others look at 3-month rolling averages.
That’s why it’s important to understand how your acquirer or payment processor calculates your ratio.
Why does the chargeback ratio matter?
It’s not just about avoiding fees. High chargeback ratios tell banks and card networks that your business may be risky or poorly managed.
Here’s what a high chargeback ratio suggests:
- You’re not delivering what customers expect
- You have poor customer service
- You sell products that cause disputes
- You allow fraudulent transactions
- You’re not handling refunds or complaints properly
In 2025, payment providers are under more pressure than ever to reduce fraud, improve buyer protection, and keep the financial system clean. That means even a small increase in your ratio can lead to big consequences.
What’s considered “too much” in 2025?
Here’s what the major players say:
Visa
In 2025, Visa still uses the monthly transaction count method.
- Standard threshold: 0.9% or higher = at risk
- High-risk threshold: 1.8% or higher = excessive
- Minimum number of chargebacks to trigger review: 100 per month
If you hit or exceed these numbers, Visa may place you in the Visa Dispute Monitoring Program (VDMP).
Mastercard
Mastercard tracks chargeback volume, not count.
- Standard limit: $5,000+ in chargebacks and over 100 chargebacks in a month
- Excessive limit: $10,000+ and over 150 chargebacks
- Chargeback ratio threshold: 1.0%
Go beyond that, and you may be enrolled in the Mastercard Excessive Chargeback Program (ECP).
Payment processors and acquirers
Many payment providers use their own internal limits. Most of them want you below 0.65%, and some high-risk processors even set the bar lower, at 0.5%.
If you’re in a high-risk industry, your processor will likely hold you to stricter standards.
So… how much is too much?
As a general rule in 2025:
Below 0.5% = Great
0.5–0.9% = Acceptable, but watch closely
1.0%+ = Warning level
1.8%+ = Likely to be penalised or terminated
Even a temporary spike can trigger monitoring. That’s why it’s important to stay in control month by month.
What happens if you go over the limit?
If your chargeback ratio climbs above the acceptable threshold, several things can happen, none of them good.
1. You’re placed in a monitoring program
Programs like VDMP or ECP mean your business is flagged as high risk. You’ll be closely watched, required to submit monthly reports, and possibly charged penalty fees.
2. Your fees go up
Some acquirers raise their processing fees automatically if your ratio goes too high. Others may require a reserve, a percentage of your sales held back to cover future chargebacks.
3. You lose your merchant account
In worst-case scenarios, your processor can shut down your account altogether. Once that happens, your business may end up on the MATCH list (also known as the TMF—Terminated Merchant File), making it much harder to get approved elsewhere.
Common reasons for high chargeback ratios
Let’s take a quick look at why businesses get hit with too many chargebacks.
- Unclear billing descriptors (the customer doesn’t recognise the charge)
- Poor delivery times (especially with dropshipping)
- Vague or misleading product descriptions
- No refund or return policy
- Hidden subscriptions that auto-renew
- Low-quality or broken items
- Poor customer service or no response
- Real fraud (stolen cards or identity theft)
In high-risk industries, even one of these issues can cause a spike in chargebacks.
How to lower your chargeback ratio?
Now that you know what’s at stake, let’s talk solutions.
Here are 10 steps you can take to lower your chargeback ratio and stay in good standing with processors in 2025.
1. Use a billing name that your customers will recognise
Many chargebacks happen simply because the customer doesn’t know who charged them.
What to do: Use your business name or something similar on your billing descriptor. Add a phone number if possible. Make it easy for your customer to connect the charge to your product.
2. Be clear about what you’re selling
Don’t overpromise or exaggerate. High-risk products like supplements or coaching services are often misunderstood.
What to do: Set realistic expectations. Use plain language. Add photos, videos, delivery estimates, and FAQs to make sure buyers know exactly what they’re getting.
3. Show your refund policy everywhere
A hidden or vague policy drives customers straight to the bank.
What to do: Make your refund and cancellation terms easy to find on your site, checkout page, and order emails. Offer partial refunds or credits if full refunds aren’t possible.
4. Remind people before auto-renewals
Subscriptions are great for revenue, but terrible for chargebacks if customers forget they signed up.
What to do: Send a friendly email a few days before the renewal. Give them a clear way to cancel or pause. This builds trust and cuts chargebacks.
5. Provide real customer support
People often file chargebacks because they feel ignored. Fast, human support can stop most of these before they start.
What to do: Offer live chat, email, or phone support. Respond within 24 hours. Be polite, even when the customer is angry.
6. Track shipments and keep proof of delivery
If you ship products, you need evidence that the customer received them.
What to do: Use tracking numbers and keep shipping confirmations for at least 6 months. For expensive items, get signature confirmation too.
7. Enable fraud filters and tools
Real fraud leads to chargebacks, and you’ll be the one paying for it.
What to do: Activate tools like-
- AVS (Address Verification)
- 3D Secure (extra step at checkout)
- IP + location checks
- Velocity filters (block multiple purchases in a short time)
Most processors offer these features; make sure they’re turned on.
8. Keep a close eye on your chargeback reports
Don’t wait for your processor to tell you you’ve gone too far.
What to do: Check your chargeback ratio monthly. If it starts creeping up, review your sales funnel, ad campaigns, and support system right away.
9. Educate your team
If your staff or virtual assistants handle support, they need to know how to respond to issues properly.
What to do: Train your team on how to de-escalate complaints, issue refunds when needed, and recognise suspicious orders.
10. Offer friendly refunds when it makes sense
Yes, refunds cost money. But chargebacks cost more.
What to do: If a customer is truly unhappy, and it’s reasonable, offer them a refund or store credit, even if you technically don’t have to. You’ll save money and protect your ratio.
Bottom Line
In 2025, keeping your chargeback ratio under control isn’t just about saving money; it’s about keeping your business alive.
Processors, card networks, and banks are stricter than ever. A ratio above 1% could lead to higher fees, account closures, or being blacklisted entirely.
But with a little awareness and a few smart changes, you can stay under the radar and keep growing your business.
Let’s recap the key numbers:
- Aim for under 0.65%
- Stay below 1% to avoid penalties
- Above 1.8%? You’re in danger territory
Stay informed. Monitor your ratios. And always make your customer experience a top priority.
Need help reviewing your chargeback data? We help high-risk businesses stay compliant and protect their merchant accounts. Book a free chargeback review today, and we’ll show you where the risks are and how to fix them.
For more industry insights, check out our article “What Are High-Risk Merchant Account Fees and Why Are They So High?”
Disclaimer
Widelia and its affiliates do not provide tax, investment, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, investment, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Please consult https://widelia.com/disclaimer/ for more information.
