In business, chargeback rate is a metric that shows the ratio between transactions and chargebacks made. The ratio is calculated as follows: the number of chargebacks divided by the number of transactions per month and then multiplied by 100 to convert it into a percentage. This ratio is called the chargeback-to-transaction ratio, but in some cases, it can also be called the dispute-to-sales ratio. Either way, it is quite telling on how well a business is doing.
Many payment processors and card networks treat a chargeback-to-transaction ratio of around 1% as a warning threshold. If a merchant’s rate exceeds this level, especially over consecutive months, the business may face increased scrutiny, higher fees, account monitoring, or even termination of their merchant account.
