The Role Chargebacks Play

It is important to remember acquiring banks and processors are like any other business; they must carefully assess risk in relation to profitability. Therefore, a processing agreement will be terminated before the risky merchant can become a liability.

Unfortunately, “risk” is a subjective term; it is defined differently by each processor and bank. However, it is safe to say all payment industry members definitely view high  as risky.

The majority of canceled merchant accounts are caused by excessive chargeback levels. The networks usually require merchants to keep their chargeback ratio below 1-2% (be sure to check the specifics regarding MasterCard chargeback thresholds and Visa chargeback thresholds).

However, it’s probable that a merchant account will be closed long before the card networks’ thresholds have been breached.