First things first, let’s get to know what a chargeback limit is. A chargeback limit is the maximum amount of money that you’re willing to lose to chargebacks in a certain period of time. This can be weekly, monthly, or even annually.
Now that we know what a chargeback limit is, let’s take a look at how it works. Chargeback limits are set by the card issuer, and they’re based on your account history and creditworthiness. If you have a good history of making payments on time and keeping your balances low, you’ll likely have a higher chargeback limit than someone with a history of late payments or high balances.
There are two types of chargebacks: fraud chargebacks and non-fraud chargebacks. Fraud chargebacks are when someone uses your card without your permission, and non-fraud chargebacks are when you dispute a transaction for another reason, like if you never received the goods or services you paid for.
If you have a lot of fraud chargebacks, your chargeback limit will likely be lower than someone with mostly non-fraud chargebacks. That’s because fraud chargebacks are more expensive for the card issuer to process, so they want to limit their exposure to them.
Now that we know all that, let’s take a look at how you can use chargeback limits to your advantage.
If you’re a merchant, you can use chargeback limits to protect yourself from fraud. For example, let’s say you have a chargeback limit of $500 per month. That means that if you get more than $500 in chargebacks in a month, you’ll start losing money.
You can also use chargeback limits to protect yourself from non-fraudulent chargebacks. For example, let’s say you sell digital products. If you have a chargeback limit of $500 per month, you can set up your account so that if a customer disputes a charge, you’ll immediately refund their money.
That way, even if the chargeback goes through, you won’t lose any money.
Chargeback limits can be a great tool for protecting yourself from fraud and chargebacks, but they’re not perfect. If you have a high chargeback rate, your limit will be lower, and you may still lose money.
If you’re a merchant, chargeback limits can be a great tool for protecting yourself from fraud and chargebacks. If you have a high chargeback rate, your limit will be lower, but you can still use them to protect yourself from non-fraudulent chargebacks. Just be sure to stay on top of your limit and account activity to make sure you’re not suddenly exposed to more risk than you can handle.
Conclusion
Chargeback limits can be a great way to protect yourself from fraud and chargebacks, but they’re not perfect. If you have a high chargeback rate, your limit will be lower, and you may still lose money. Chargeback limits are also subject to change at any time, so you’ll need to stay on top of them to make sure you’re not suddenly exposed to more risk than you can handle.