Chargeback thresholds are set by each card network to limit how many chargebacks a merchant may process. The threshold is set as a ratio of monthly chargebacks divided by total monthly transactions. Typically, if the chargeback ratio approached 1% of total sales, the merchant is put into a monitoring program by the card network. Chargeback fees increase and additional penalties are assessed on the merchant until they are able to get their ratio down below the threshold. If the merchant fails to get under the threshold within a given period, they get terminated from processing on that card network.
