A chargeback ratio is the proportion of a merchant’s transactions that turn into disputes, and it is the primary number card networks use to judge merchant health. Visa and Mastercard calculate it differently. Visa’s VAMP ratio adds fraud reports and disputes together and divides by settled transactions, applied to card not present volume, while Mastercard compares this month’s chargebacks to the previous month’s transaction count.
Why it matters
The ratio, not the absolute number of chargebacks, is what triggers monitoring programs, fines and eventually termination. A growing merchant can see its ratio improve while chargebacks rise, and a shrinking one can breach thresholds with a handful of disputes because the denominator collapsed. High risk merchants should track their ratio the way a public company tracks earnings, per MID and per month, and know exactly how far they sit from each network’s thresholds.