Learn about card network monitoring programs
About disputes, chargebacks, and fraud risk
When processing card payments through Square, and as part of your financial obligations to the card networks, disputes (also called chargebacks) and fraud volumes must be maintained at acceptable levels. If they exceed the thresholds set by card networks (for example, Visa or Mastercard), the network may place you into one of their monitoring programs.
Until you reduce your dispute or fraud levels, you can incur monthly fines and additional fees, charged by the networks. The assessment of potential fines depends upon the count, type of chargebacks, and dispute and fraud amount you are experiencing.
Before you begin
Square will notify you via email as soon as we are made aware of your placement within the card network’s programs. We can also help identify potential causes and contributors to the increased rates, as well as recommend actions you can take to help drive down your chargeback exposure The standard enrollment period is 12 months. However, for both Visa and Mastercard, you can exit the program if you remain under thresholds for three consecutive months.
If the requirements of a program within the specified timelines are not met, this can result in the card networks refusing to process further card payments.
TC40 and System to Avoid Fraud Effectively (SAFE) reports are documents filed by card-issuing banks when a customer claims that a charge on their account is fraudulent. The reports are sent to the card network (Visa and Mastercard, respectively) and the merchant's bank.
Visa’s monitoring programs
Visa’s excessive chargeback and fraud programs are referred to as Visa Dispute Monitoring Program (VDMP) and Visa Fraud Monitoring Program (VFMP). These programs set standards for a merchant’s acceptable monthly chargebacks.
Visa Dispute Monitoring Program (VDMP)
Visa can place sellers in the VDMP program if they meet or exceed the following criteria:
The total number of payment disputes (dispute count)
The ratio of disputed payments to all captured payments (dispute rate)
If the total number of payment disputes (total dispute count) is between 100 - 999, and the dispute rate is 0.9%, the fines begins after four months and continue on a monthly basis until removal of the VDMP program.
- Months 1-4: No fines.
- Between months 5-9: Visa fine sellers $50 USD per dispute.
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Between months 10-11:
- Visa will fine sellers $50 USD per dispute.
- Visa can begin to apply a $25,000 USD review fee.
- Might require an external audit with results made available to Visa.
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For 12 and above months:
- Visa fine of $50 USD per dispute.
- Visa can begin to apply a $25,000 USD review fee.
- Seller will be disqualified from the Visa card processing network and no longer process Visa card payments for online and in-person payments.
If the total number of payment disputes (dispute count) exceeds 1,000 and the dispute rate is 1.8%, the fines begin immediately and will continue until removal of the VDMP program.
- Between months 1-6: Visa will fine sellers $50 USD per dispute.
- Between months 7-11:
- Visa will fine sellers $50 USD per dispute.
- Visa can begin to apply a $25,000 USD review fee.
- For 12 and above months:
- Visa fine of $50 USD per dispute.
- Visa can begin to apply a $25,000 USD review fee.
- Seller will be disqualified from the Visa card processing network and no longer process Visa card payments for online and in-person payments.
Visa Fraud Monitoring Program (VFMP)
Using early fraud warning (EFW) data, Visa can place sellers in the VFMP program if they meet or exceed the level of fraud on their account. Criteria includes:
The total USD volume of fraud volume (EFW)
The ratio of the USD volume of EFWs to the USD volume of all captured payments (Fraud Rate)
An early fraud warning (EFW) includes the month in which the data claim was reported, not the month when the reported payment was captured. For example, calculations for June include payments captured in June and EFWs reported in June, even if the potentially fraudulent payments were captured in March. The June calculations don’t consider any payments captured in March.
For a fraud amount of $75,000 USD, the dispute rate is 0.9% and the fines begin after four months. Fines will continue on a monthly basis until removal of the VFMP program.
- Months 1-4: No fines.
- Between months 5-6: $25,000 USD fine.
- Between months 7-9: $50,000 USD fine.
- Between months 10-12: $75,000 USD fine.
Mastercard's monitoring programs
Mastercard’s versions of high dispute programs are called Excessive Chargeback Management (ECM) and High Excessive Chargeback Management (HECM). As above, these programs set thresholds for acceptable monthly chargeback ratios and allow for potential fines, again, depending on the count and type of chargebacks arriving.
If your account exceeds the thresholds set by the Mastercard programs, Mastercard places you into that program and Square will notify you.
For every 100-299 chargebacks with a Chargeback to Sales Count Ratio of 1.5% to 2.99%.
Both the count and the ratio thresholds must be met for a merchant to enter the ECM or HECM programs.
For 300+ chargebacks with a Chargeback to Sales Count Ratio of 3%.
Both the count and the ratio thresholds must be met for a merchant to enter the ECM or HECM programs.
Up to 1 month above ECM thresholds: 0 assessment, no issuer recovery assessment
Up to 2 months above ECM thresholds: $1,000 assessment, no issuer recovery assessment
Up to 3 months above thresholds:
- $1,000 ECM assessment, no issuer recovery assessment
- $2,000 HECM assessment, no issuer recovery assessment
Between 4-6 months:
- $5,000 ECM assessment, issuer recovery assessment*
- $10,000 HECM assessment, issuer recovery assessment*
Between 7-11 months:
- $25,000 ECM assessment, issuer recovery assessment*
- $50,000 HECM assessment, issuer recovery assessment*
Between 12-18 months:
- $50,000 ECM assessment, issuer recovery assessment*
- $100,000 HECM assessment, issuer recovery assessment*
Between 19+ months:
- $100,000 ECM assessment, issuer recovery assessment*
- $200,000 HECM assessment, issuer recovery assessment*
- Issuer recovery assessment applies to the merchant at $5 USD per chargeback for over 300 chargebacks.