Visa Credit Card Services Chargeback Monitoring

Both of the Credit Card Networks (Visa and MasterCard) and companies (Discover and American Express) have devised and instituted credit card services programs for monitoring and managing the chargeback levels of the merchants accepting their bank cards.

Visa monitors the chargeback performance of all businesses and non-profit organizations accepting their cards on a per-month basis and notifies the respective processing bank (also known as a merchant bank or simply an acquirer) whenever any one of its card acceptors reaches or exceeds excessive chargeback rates. Visa considers chargeback rates of 1 percent or higher to be excessive.

Whenever it is informed of a card acceptor with excessive chargeback rates, processing banks are required to take strong measures to decrease the merchant's chargeback rate. How this is done will depend on the interaction of a number of factors, such as the merchant type, processing volume, geographic location, and other credit card services risk factors. Often card acceptors are required to give their sales personnel with additional training on credit card processing procedures. Card acceptors may also be asked to work with their acquiring banks to design and implement a detailed chargeback-lowering plan.

Visa may assess monetary penalties on processing banks that are unable to reduce their card acceptors' excessive chargeback levels. Visa has designed two separate chargeback monitoring programs:

• Merchant Chargeback Monitoring Program (MCMP). MCMP monitors chargeback ratios for all processing banks and card acceptors on a per-month basis. If a card acceptor reaches excessive chargeback levels, Visa informs the affected acquiring bank in writing. MCMP applies to all credit card services users with more than 100 total transactions per month, including sales, credits, etc., in excess of 100 chargebacks, and an overall chargeback-to-transaction ratio of 1 percent or higher. The initial notification of an excessive chargeback ratio for a given card acceptor is considered to be a warning. Visa assesses fines only if remedial actions are not performed within a pre-defined period of time to get the chargeback ratio back to acceptable rates.
• High-Risk Chargeback Monitoring Program (HRCMP). HRCMP is specially developed to limit excessive chargeback rates by high-risk businesses. High-risk card acceptors include charities, custom made items, diet programs, discount buying clubs, fortune tellers, gambling advice, telephone prepaid cards, ticket brokers, toor to door sales. HRCMP applies to all high-risk card acceptors with greater than 100 total payments per month - sales, refunds, etc. - in excess of 100 chargebacks, and a total chargeback-to-payment rate of 1 percent or higher. Unlike the MCMP, under HRCMP, there is no warning period and charges of $100 per item are imposed immediately if a card acceptor has an excessive chargeback level.

Visa also monitors international transactions and chargeback levels through its Global Merchant Chargeback Monitoring Program (GMCMP).