Chargebacks are never welcome, but having too many can multiply the expense. Merchants with high chargeback ratios are often charged additional fees and penalties by the major card networks.
American Express is no exception, but Amex Excessive Chargeback Fees and the Fraud Full Recourse Program work differently than the programs run by Visa or Mastercard.
While those networks handle excessive chargebacks through formal monitoring programs (such as the new Visa Acquirer Monitoring Program and Mastercard’s Excessive Chargeback Program) American Express most often imposes a straightforward Excessive Chargeback Fee on merchants instead.
For merchants who process a significant number of Amex transactions, the impact of Excessive Chargeback Fees can be substantial. A few dozen extra disputes can translate into hundreds of dollars in additional penalties. The good news is that with the right strategies, tools, and monitoring processes, merchants can often keep their ratios well below the threshold.
If a merchant’s chargeback-to-transaction ratio exceeds 1% for three consecutive months, they begin incurring a $25 fee for every chargeback above the 1% mark.
American Express determines a merchant’s monthly chargeback ratio by dividing the total number of chargebacks (minus any reversals) by the total number of gross charges (minus credits) for that month. If the ratio is over 1% for three months in a row, the Excessive Chargeback Fee is triggered.
Once triggered, the merchant is charged $25 for each chargeback that exceeds the 1% limit. For example, if a merchant processes 5,000 Amex transactions in a month, the 1% threshold would be 50 chargebacks. If they receive 65 chargebacks, the 15 disputes above the limit would each incur a $25 fee, totaling $375 in penalties for that month.
The ratio is recalculated every month. Merchants can exit the fee period by bringing their ratio below 1%.
The American Express Fraud Full Recourse Program revokes the right to request reversals of fraud-related chargeback for merchants that are deemed to have disproportionate chargeback rates.
This means that if a transaction is disputed as fraudulent, the merchant will automatically be responsible for the chargeback amount, with no opportunity to provide evidence to the contrary. The merchant will also be ineligible for the fraud liability shift provided by SafeKey.
Here are Amex’s guidelines for what causes a merchant to be enrolled in the Fraud Full Recourse Program:
|
Program Threshold
|
Fraud Ratio |
Minimum Fraud Amount
|
| Low Tier | 0.90% | $25,000 |
| High Tier | 1.80% | $50,000 |
Merchants can exit the Full Fraud Recourse Program by maintaining a fraud rate below the low tier threshold for three consecutive months. Merchants who haven’t exceeded the high tier threshold will have a chance to immediately exit the program before any consequences are imposed. If the merchant stays below the threshold in the three months after they receive notice from American Express that they’ve exceeded it, the program will not be enforced.
American Express also has discretion to enroll merchants in the Fraud Full Recourse Program for other reasons, such as:
American Express also has two immediate chargeback programs which are often voluntary, providing an option for merchants that want to limit or eliminate inquiries. However, American Express retains discretion to enroll merchants for their own reasons.
Reducing a high chargeback ratio requires more than addressing individual disputes. Merchants must deploy targeted tools and processes that prevent customer disputes before they occur or resolve them before they become chargebacks. Let’s look at some of the methods and tools that merchants can leverage to avoid Excessive Chargeback Fees from American Express.
One of the simplest yet most effective ways to prevent chargebacks is to respond quickly to inquiry notices from American Express. An inquiry is a request for more information about a transaction before it becomes a formal chargeback.
By providing the requested documentation—such as proof of delivery, order confirmation emails, or records of customer communication—merchants can often resolve the issue in the inquiry stage. This prevents the dispute from counting toward the monthly ratio and avoids both lost revenue and potential fees.
To take advantage of this, merchants need to:
Amex Accelerated Dispute Resolution (ADR) offers merchants an opportunity to address disputes before they are finalized. In many cases, ADR provides up to eight calendar days to review and respond to disputes that are not related to fraud.
When a merchant participates in ADR, they can submit compelling evidence—such as delivery confirmation, refund records, or proof that the transaction was authorized—to prevent the chargeback from being posted to their account.
As with inquiries, ADR requires a well-defined internal process to quickly respond with complete documentation when an eligible dispute arises.
Unauthorized transactions remain one of the leading causes of chargebacks. To combat this, merchants should make full use of fraud prevention tools:
The goal is to strike a balance, reducing fraud without creating a situation where legitimate customers are frequently denied and abandon their purchases.
To prevent non-fraud chargebacks, merchants need to know why disputes are happening in the first place. This requires gathering and analyzing detailed data, such as:
By examining trends, merchants can uncover systemic issues. For example, they might find that a certain SKU has a higher dispute rate, that fraud is concentrated in orders from specific regions, or that disputes spike after the 30-day refund window closes.
Once identified, these issues can be addressed directly through tactics like improving product descriptions, tightening fraud filters for high-risk regions, or adjusting policies.
Many disputes are the result of customer misunderstanding. Merchants can address this by:
These small changes can significantly reduce disputes caused by customers who don’t recognize a charge, find it difficult to contact customer support, or feel entitled to a refund that’s outside the policy.
Even for merchants with strong internal processes, monitoring chargeback ratios (and VAMP ratios) across multiple processors, MIDs, and card brands can be a challenge. This is one area where a chargeback management company can add significant value.
These providers can:
By partnering with a company like Chargeback Gurus, merchants can gain a clear, actionable picture of their dispute performance and have experts on hand to help develop the most cost-effective strategy.
Amex’s Excessive Chargeback Fee may not come with the formal monitoring structure of Visa or Mastercard’s programs, but it can still have a substantial impact on a merchant’s bottom line.
Preventing these fees requires a combination of tools and proactive measures: responding quickly to inquiry notices, leveraging Amex ADR, tightening fraud controls, improving communication with customers, and using analytics to address the root causes of disputes.
By making dispute prevention and monitoring a regular part of operations, merchants can protect their revenue, keep fees at bay, and ensure their companies are set up for future success.