Understanding the Mastercard Excessive Chargeback Program

Table of Contents

1. What is the Mastercard Excessive Chargeback Program?
2. What Are the Different Tiers of the ECP?
3. How Do You Get Out of the ECP?
4. Using Chargeback Prevention Alerts
5. Stop Chargeback Problems Before They Start

Nobody likes chargebacks. Even though they may be necessary at times to protect consumers from fraudsters and deceptive merchants, in an ideal payment ecosystem chargebacks would be few and far between. The card brands are keenly aware of this, and they frequently put out mandates and guidelines designed to reduce the number of chargebacks that pass through their networks.

Beginning in 2019, Mastercard tackled this problem with their Excessive Chargeback Program (ECP), which monitors dispute activity and penalizes merchants who let their chargeback rate spiral out of control. What do merchants need to know about the ECP—and how to avoid getting placed in it?

Mastercard created the ECP as part of a broader push to bring down fraud and chargeback rates. This program tracks all Mastercard chargebacks and establishes a multi-tiered system for dealing with merchants with excessive chargeback rates. Merchants who fail to bring their chargeback rates down may find themselves added to one of the two tiers of the program, where fines are imposed and the merchant's acquiring bank may be penalized as well.

All this might sound a bit draconian, but the goal of reducing chargeback rates is something that merchants should already be on board with, for their own financial health and protection.

With or without Mastercard's involvement, a high chargeback rate can pose an existential threat to a merchant's ability to stay in business.

Chargebacks not only come with fees and a loss of revenue, but also have many hidden costs, such as the loss of a future customer and any time and money spent acquiring and providing service to that customer. All told, the cost of a chargeback is often more than twice as much as the original transaction amount. Too many chargebacks, therefore, can seriously hurt a business's bottom line.

Plus, even without the additional incentives from Mastercard, acquiring banks already frequently terminated merchant accounts over issues with excessive chargebacks. This sort of account termination usually gets merchants put on the MATCH list, an industry-wide blacklist also run by Mastercard. Merchants on the list have difficulty starting or maintaining relationships with banks and payment processors, and those that are willing to do business with a merchant on the list will charge higher fees. These consequences can spell doom for a business, especially since it takes years to be removed from the MATCH list.

What is the Mastercard Excessive Chargeback Program?

Mastercard’s purpose for the ECP is to reduce fraud and chargebacks and create better payment experiences by keeping a watchful eye on dispute activity and enforcing compliance with practices that minimize the occurrence of chargebacks. Acquiring banks are responsible for tracking their merchants’ chargeback levels, reporting them to Mastercard, and communicating the requirements of the program to merchants to ensure they aren't blindsided by the consequences of excessive chargebacks under the program.

Placement in the ECP is determined by calculating a merchant’s chargeback ratio by dividing the number of chargebacks received in one month by the number of transactions processed in the preceding month. Merchants who exceed certain thresholds, which we will discuss below, are automatically entered into the program.

While many chargebacks are caused by fraudsters, merchants often inadvertently invite chargebacks with sub-optimal customer service and other business practices, such as using billing descriptors that confuse customers. Chargebacks that result from these bad habits are costly, create negative customer experiences, and are completely avoidable.

The ECP is intended to help merchants rid themselves of bad habits for the overall benefit of the Mastercard payments ecosystem.

The ECP also provides Mastercard with a mechanism for severing ties with merchants who deliberately flout their guidelines or intentionally defraud customers.

What Are the Different Tiers of the ECP?

In the early days of the ECP, there was an additional tier of the program called Chargeback Monitored Merchant, which essentially just served as a warning for merchants that they were at risk of finding themselves in the higher tiers, which come with actual consequences. That way merchants would be well-informed of the consequences they would face if they didn't get their chargeback levels down. However, with the full rollout of the ECP, Mastercard eliminated this warning tier, leaving only the two higher tiers in place.

The first tier is Excessive Chargeback Merchant (ECM). A merchant is categorized as an ECM when they receive 100 or more monthly chargebacks and their ratio exceeds 1.5% for two consecutive months. At 300 or more chargebacks per month and a ratio of 3% or higher, merchants are place into the second tier: High Excessive Chargeback Merchant (HECM).

The program also has increasing fines for merchants based on how long they have been in ECM or HECM status:

*Merchant may also receive an Issuer Recovery Assessment, in which they must pay 5 USD/EUR for each chargeback after the first 300.

There are also consequences for acquirers when merchants stay in the ECP for too long. After 6 months, Mastercard may require the acquirer to create and put into action a plan to resolve the issue at their own expense. After 12 months, Mastercard starts charging the acquirer fees as well as the merchant. Most acquirers will terminate the merchant account to avoid this.

In addition to the violation assessments in the table above, Mastercard also charges a $100 reporting fee and an issuer recovery fee, which may vary. Mastercard did not immediately begin assessing fines when the ECP first launched, but as of September 2020, penalties are being enforced for all merchants globally.

How Do You Get Out of the ECP?

Once a merchant is enrolled in the ECP, Mastercard will typically ask them to submit a remediation plan. This is a document that outlines the steps the merchant is taking to reduce their chargeback levels. The plan should include a description of the business, an explanation of the circumstances that have led to their current high chargeback levels, the dates on which specific actions were taken to mitigate these circumstances, and a list of any anti-fraud tools the merchant is using.

The only way to “graduate” from the ECP is to maintain chargeback levels below the ECM threshold for three consecutive months. Once a merchant has accomplished this, they are considered to be back in compliance. There’s no probationary period once a merchant exits the ECP—they’re safely back to square one.

Using Chargeback Prevention Alerts

One of the most effective tools for avoiding enrollment or accelerating removal is the use of chargeback prevention alerts. These alerts intercept disputes before they become chargebacks, helping merchants keep their ratios below Mastercard’s critical thresholds (150 basis points for ECM, 300 for HECM).

Normally, when a cardholder disputes a transaction, the merchant doesn’t find out until after the issuer files the chargeback. By then, the damage is done.

Chargeback prevention alerts change that timeline. When a cardholder contacts their bank, the issuer sends an alert through a dispute network (either Verifi or Ethoca). That alert pauses the chargeback process and gives the merchant 24–72 hours to respond. If the merchant issues a refund during that window, the chargeback is canceled and never impacts their chargeback metrics.

Although each alert carries a fee, usually between $35 and $40, for many merchants that expense can be minor compared to the potential cost of ECP penalties.

Key Providers and Coverage Differences

Two major networks facilitate chargeback prevention alerts: Verifi and Ethoca. Verifi is owned by Visa and Ethoca by Mastercard, but their coverage is not exclusive to their associated card brands, Verifi has strong coverage among U.S. financial institutions, and can cover Mastercard chargebacks that Ethoca alone might miss. Ethoca has broader participation from issuers across Canada, Europe, and parts of Asia.

Because coverage depends on whether both the cardholder’s bank and the merchant are connected to the same network, some alerts will only trigger through one or the other. Merchants that rely on a single network may miss certain disputes entirely. For that reason, many businesses choose to enroll in both Verifi and Ethoca, often through an authorized reseller like Chargeback Gurus.

This approach consolidates coverage under a single dashboard, simplifies management, and maximizes the number of intercepted chargebacks. It also ensures consistent monitoring across multiple merchant IDs, payment processors, and international markets.

Managed vs. Automated Alerts

When adopting chargeback prevention alerts, merchants must decide whether to handle alerts internally through internal staff, through automation, or through a managed service provider. Using internal staff can be efficient for smaller operations that have the time to review each alert and make quick refund decisions. Automation brings efficiency, but automation alone can fail to match the alert to the transaction in cases of partial disputes, mismatched dates, or duplicate transactions.

Fully managed alerts use a combination of automation and expert oversight to ensure timely responses and data accuracy. These experts can filter out low-value alerts, adjust refund rules, and determine responses based on whether the merchant would likely be able to reverse the chargeback through representment.

Managed services also provide active monitoring of chargeback ratios across all merchant accounts, issuing early warnings when thresholds approach critical levels. For high-risk or high-volume merchants, this oversight can be the key to regaining compliance quickly and avoiding costly penalties under Mastercard’s ECM framework.

Stop Chargeback Problems Before They Start

Chargeback monitoring programs can motivate merchants to take a growing problem with disputes seriously and dig themselves out of a bad situation, but it's better to not get placed in one at all. A proactive fraud and chargeback prevention strategy can keep your chargeback rate low enough that you won't have to worry about crossing any excessive chargeback thresholds. After all, Mastercard isn’t the only card network with a compliance program.

The costs of chargebacks are considerable, far exceeding the loss of revenue alone—and that's before you factor in the fines charged by the ECP and similar chargeback monitoring programs. If you're sweating bullets every month hoping you skate under the threshold, it might be worth investing in a chargeback management firm that can give you the knowledge and resources to win disputes, prevent chargebacks, and stay in the good graces of the card networks.