1st Chargeback Rate KPI

1st Chargeback Rate

The 1st Chargeback Rate KPI measures the proportion of transactions that result in an initial chargeback, where a cardholder disputes a transaction directly with their issuing bank.

This KPI is crucial for merchants as it serves as an early indicator of dispute volume and risk, monitored by credit card processors and acquiring banks. A high 1st chargeback rate, often exceeding thresholds like 1% for Visa or Mastercard, can lead to penalties such as fines, increased fees, or entry into monitoring programs (e.g., Visa’s VDMP or Mastercard’s ECM). Common causes include fraud, customer dissatisfaction, processing errors, or unclear billing descriptors. Initial chargebacks represent the first step in the dispute process, and if merchants successfully represent their case, the chargeback may be reversed; otherwise, it could escalate to a second chargeback or arbitration.

To manage and reduce the 1st chargeback rate, merchants should focus on improving transaction authorization processes, enhancing fraud detection, providing clear billing practices, and offering robust customer support to resolve issues before disputes arise. For issuers, this metric highlights potential fraud or service issues, while customers may initiate chargebacks due to unrecognized charges or dissatisfaction. Monitoring this KPI enables merchants to address root causes, maintain compliance with card network policies, and safeguard revenue.