Credit Card Processing
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Authorizations and Deposits
AUTHORIZATIONS AND DEPOSITS
What is an Authorization?
As the name implies, an authorization is a transaction you use to:
Help verify that the card is not counterfeit
Verify that the cardholder has sufficient credit for the purchase
Place a "hold" on the cardholder¡¯s credit line for
the amount of the transaction
Can you explain my ¡°Pass Through
Pass Thru Fees are charges that all Acquirer/Processors pay directly
to Visa/MC for the use of their networks. Those fees are based on
variables associated with your specific processing method. For example,
the lowest Pass-Thru fees are typically given in a Face-to-Face
swiped transaction where the card and cardholder are both present.
What is a deposit? Do I need to process a
deposit for every sale?
A deposit is the transaction that withdraws funds from the cardholder¡¯s
credit line and deposits them into your sponsoring bank account
(or other account you¡¯ve designated). Every sale must include
an authorization and a deposit, in that order. Usually, in a retail
setting, the authorization and deposit are handled as a single "sale"
transaction. In mail order or other "non-magnetic" transactions,
the deposit might come hours or even days after the authorization,
and is timed to the delivery of the goods.
How long do I need to wait for the proceeds
of a deposit to be made available in my bank account?
Most Credit Card Processors will normally deposit your funds in
Do I need to run the authorization separate from
the deposit transaction?
No. When the goods or services are being delivered immediately,
you will use the SALE transaction (or Authorization and Deposit
transaction). So, in addition to authorizing the charge, it deposits
the funds for the sale into your checking account.
I¡¯ve already obtained an authorization.
Do I still need to process a deposit?
Yes. The funds will not be available to you unless you process
What Is an Authorization Number?
An authorization number, whether obtained electronically through
your POS system, your PC processing system, the Internet, or from
a representative at the Visa/MasterCard authorization center, indicates
that the transaction has credit available on the card and that the
transaction is not disputed by the cardholder.
Why do I sometimes get a "call voice
center" response when I try to get a credit card authorized?
There are two primary reasons you might get this response. First,
the automated, communications system processor uses to receive authorizations
may be inoperable for some reason. This happens very infrequently,
but in those cases you are advised to call the voice center.
The second reason this might occur is the card-issuing bank may
want to talk to you before they approve the transaction. This can
be due to a reported stolen card or just a lot of transactions in
a short time (holiday shopping).
What is a Sales Draft?
A Sales Draft is a receipt of acknowledgement that the credit card
customer signs upon completion of the transaction. A Sales Dradt
is automaticall generated and signed by the customer during most
face-to-face credit card transactions.
When do I Still Need A Sales Draft?
For every face-to-face credit card sale, a sales draft must be completed.
This draft is a legal and binding contract between you and your
If you have a POS system with a printer attached, it will automatically
generate a sales draft for credit cards that are deposited electronically.
When the draft has finished printing, present it to the cardholder
for signature. Give the cardholder the bottom copy of the draft
and retain the top copy (with the original signature) for your files.
Do I Need to Have an Imprint of the Card for it
to be Accepted for Payment?
Yes. The imprint of the card is your proof that the actual card
was present at the time of the transaction. This proof is critical
in the case of a disputed transaction and could make the difference
between your being liable for a transaction or not.
What Information Needs to be on the Sales Draft?
Whether printed by your POS system printer or produced manually
on an imprinter, the sales draft must contain:
The credit card number (recorded from the card¡¯s magnetic
stripe or imprinted)
Authorization and Reference Numbers
Signature of customer
The card¡¯s expiration date
Date of sale
Amount of sale, including tax
Description of goods/services
What Do I Do with My Copies of the Sales
You are required to keep your drafts for three years (even if you
sell your business). In the event of a question or chargeback, you
may be required to produce the signed sales draft. Check with your
accountant for guidance before destroying sales drafts.
What Is A Credit?
A credit is a refund issued by you to a legitimate customer due
to a return, cancellation of a sale or entry error. This transaction
reduces your day¡¯s processing total.
When Should I Issue A Credit?
A credit is required when a customer returns merchandise or cancels
a sale and requests a refund on the amount of the return. You should
process the credit through your POS system if the original transaction
was electronically deposited.
Am I Required To Issue A Credit?
No. But even if it is your store policy not to issue credits, your
customer has the right to seek reimbursement through chargeback
If your store incurs excessive chargebacks, you may be required
to pay additional fees and, in extreme cases, have your right to
accept VISA or MasterCard revoked. Therefore, a refund to one dissatisfied
customer may be better than a potential chargeback ¡ª but you
must make that decision.
What Is A Chargeback?
A cardholder may dispute a charge for many reasons (see below).
The cardholder is within his/her legal rights to begin procedures
to dispute the charge up to six months after the date of sale, although
in some cases the charge may be disputed up to 3 years after.
Am I Liable for Chargebacks?
Yes, if the customer has a valid dispute with the charge in question
and you do not satisfactorily remedy the situation. If, however,
the customer doesn¡¯t have a valid dispute and you complied
with processing regulations, you may not be liable.
What are some of the Different Types of Chargebacks?
sale can be charged back for more that 35 valid reasons, the four
most common are:
no signature on a draft
failure to fulfill a request for a sales draft
no imprint on a draft
For more information and FAQs on chargebacks, click here.
What Is the Chargeback Procedure?
Most often, the first stage of a chargeback proceedure comes in
the form of a ¡®retrieval request.¡¯ A retrieval request
is a request from a card-issuing bank to see an original, photocopy
or fax of a sales draft to prove the validity of the sale. If one
of your customers disputes a VISA or MasterCard sale, you will receive
a letter of notification and be requested to send a copy of the
signed copy of the draft or other information to your processor.
In most cases, if your records are complete and you have complied
with credit card regulations, you can successfully contest chargebacks.
It is also possible that the initiation of a chargeback will cause
the cardholder¡¯s bank to withdraw funds from your bank account.
Note that you would be notified by letter after your account has
been debited. This is why we always encourage merchants to maintain
a balance in their accounts.
What Is My Responsibility?
You are required to locate the signed copy of the draft or other
requested information and send a copy of it to your processor within
the time allowed. Failure to do so will result in a chargeback due
to non-receipt of requested item. Your Credit Card Processors may
request copies up to three years following the date of sale.