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Chargeback Insurance is a policy that protects acquirers, Independent Sales Organizations (ISOs) and others who may underwrite or sell merchant accounts. If a merchant they underwrite turns out to be fraudulent or goes out of business leaving a lot of chargeback claims unanswered and not enough funds to cover the losses, than the Chargeback Insurance policy covers these losses on behalf of the acquirer or ISO.

Key considerations when implementing or buying this functionality include:

  • Does the insurance protect against all chargeback reason codes?

  • Does the insurance protect against merchant fraud or only consumer fraud?

  • What if the merchant goes out of business?

  • Can the client choose which of their merchants will be covered under the insurance?

  • Can this insurance policy be used in conjunction with other policies?

  • What is the maximum percentage or dollar amount of chargeback losses that can be covered for a business' single merchant client or for their policy overall?


Chargeback Insurance protects acquirers and ISOs by providing an insurance policy to protect against an acquirer’s client defaulting on payments due to issuers resulting from chargebacks. Legitimate merchants can be put out of businesses from receiving too many chargebacks, and fraudsters may setup a fake business that results in hundreds of chargebacks. In either case, if the merchant goes out of business or suddenly closes shop and they don’t have the balance to cover the chargebacks in their merchant account, than a Chargeback Insurance policy will protect the merchant acquirer by covering these costs.

In many cases an acquirer may require a minimum balance, or reserve, in the merchant account to cover chargebacks, refunds and other costs. There are many controls acquirers use to maintain a portion of credit card sales on hand for chargebacks and refunds that come in, but even when using such controls a merchant can ring up a high number of chargebacks. There are also scenarios where legitimate merchants going out of business sell more products than they have; the merchant cashes out and leaves the acquirer to deal with the chargebacks. A Chargeback Insurance policy covers the chargebacks losses in these cases, and often acquirers or ISOs purchase such policies because it enables them to be less strict with sales caps, reserves and other merchant account controls to limit risk.


If a merchant goes out of business or leaves a zero balance in their merchant account but chargebacks continue to come in against that merchant, the Chargeback Insurance policy covers these costs to cover the liability of the acquirer or ISO that sold the merchant account.


Chargeback Insurance policies protect acquirers or ISOs who sell or underwrite merchant accounts in the event that a merchant leaves their acquirer with a lot of chargebacks and not enough funds in their merchant account to cover their costs.

When an acquirer or Independent Sales Organization (ISO) signs a business up for a merchant account, they are taking on the risk that the merchant will stay solvent and not owe money to various card issuers due to chargebacks, not shipping goods or other reasons. If a merchant goes out of business and owes money to issuers from refunds and chargebacks, the merchant acquirer will be liable.

A merchant may not be fraudulent, but they may have a poor product that results in a lot of refunds. Some merchants may receive a lot of chargebacks from third party fraud while some merchant may be fraudsters themselves; there are many risks an acquirer takes on when they underwrite a merchant. In case a merchant cannot cover the cost of their chargebacks a Chargeback Insurance policy protects that acquiring bank or ISO.

For services that cover the costs of chargebacks for a merchant, these are known as eCommerce Insurance or Chargeback Protection services


Help your merchant clients better understand and learn from the chargebacks they are receiving. The Chargeback Monitoring Service offered by The Fraud Practice uses a proprietary process of breaking down chargebacks and retrieval requests into groups, operational areas and business functions offering companies a fast and reliable monitoring tool to quickly assess and evaluate the health of their risk and operational programs.


Alternative Solutions - Acquirers can use merchant account controls such as requiring reserves, transaction holds, sales caps, disbursement limits and others to help mitigate risk. For a merchant to insure against chargebacks they should look consider eCommerce Insurance

Building this In-House - N/A

Estimates Costs - Businesses are charged a monthly premium for the policy.

Sample Vendors - N/A

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