Commerce Glossary

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What is a Chargeback Rate?

charge - back rate
noun
The chargeback rate is a metric that shows the ratio between the total number of transactions and the total number of chargebacks a merchant has earned.
How Does a Chargeback Rate Work?

The chargeback rate calculation is calculated dividing the number of open chargebacks (regardless of current status) by the number of finalized transactions, both in the previous month. Only include finalized transactions for payment methods that allow chargebacks (including credit cards and PayPal). Otherwise, your calculation will underrepresent actual chargebacks. A healthy chargeback rate has to be below 1%. What exceeds this number is considered unacceptable by most payment processors, leading to merchant account termination.

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