UK card-machine reference
Chargebacks for UK card-machine merchants.
A chargeback is when a cardholder disputes a transaction with their bank and the card scheme reverses the funds out of your merchant account. You get the money back if you defend successfully with evidence. You get nothing if you ignore the chargeback notice. The mechanics matter , most UK SMEs lose chargebacks they could have won.
In one sentence
When a chargeback arrives, you usually have 7-14 days to submit evidence (signed receipt, proof of delivery, refund correspondence) via your acquirer's portal , miss the deadline and you lose by default, regardless of merit.
The 6 most common UK chargeback reasons
- Fraud (cardholder says "not me"). Card-not-present transactions: very hard to defend without 3D Secure. Card-present: defendable with chip-and-PIN log + ID check.
- Goods/services not received. Defend with proof of delivery (tracked) or signed receipt.
- Goods/services not as described. Defend with the original product description + photos + customer's pre-purchase communication.
- Duplicate billing. Defend by showing the two transactions are for distinct items (different invoice numbers + dates).
- Cancelled recurring subscription. Defend with the original T&Cs + the cancellation request timeline.
- Credit not processed. Defend by showing the refund was attempted (e.g. customer's card was closed).
The 1% ratio threshold
Visa and Mastercard track your chargeback-to-transaction ratio across rolling windows. The thresholds change but the order of magnitude is:
- Under 0.5% , you're fine. Most healthy UK SMEs sit around 0.1-0.3%.
- 0.5% - 1.0% , you're in the warning zone. Your acquirer will write to you asking for action.
- 1.0% and above , you're in a monitoring programme. Penalty fees per chargeback (e.g. £15 each), increased fees across all transactions, mandatory remediation plan.
- Persistent above 1.5% , acquirer terminates your merchant account. New acquirer onboarding becomes very hard for 6-12 months.
The fastest way to push the ratio up is high-volume small-ticket fraud , e.g. a hospitality merchant getting hit by stolen-card test transactions on a Saturday night. The fastest way to push it down is volume growth.
What your acquirer charges per chargeback
Regardless of who wins, the acquirer charges a fee per chargeback notice for processing , typically £15-£25. You pay this even if you defend successfully. Cumulative fees alone can wipe out a small merchant's margin if chargebacks spike.
Reducing chargebacks before they happen
- Card-present: always insist on PIN for high-value transactions, even on contactless-eligible cards above £100.
- Card-not-present: enable 3D Secure on every online checkout. Shifts liability for "not me" chargebacks back to the issuing bank.
- Descriptor on customer's statement: use your trading name (not your Ltd company name) so customers recognise the charge. "Friendly fraud" (customer forgets they bought it) is the biggest preventable category.
- Refund quickly: if a customer asks for a refund, process it within 3 working days. Slow refunds become chargebacks.
- Receipts: email a digital receipt for every transaction. Receipts are evidence.