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Merchant account processing are services provided by a bank or a third party processor (on behalf of the bank), to the merchant that include authorization of credit cards, settlement of funds through the bank associations (MasterCard/Visa), depositing of funds to checking accounts, merchant billing and account activity reporting. Internet Payment Gateway (iPG) allows you to process orders online.
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Processing Guidelines |
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Chargeback Prevention |
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Merchant Account Expense Management |
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PROCESSING GUIDELINES |
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It is imperative that merchants follow all regulations when processing card transactions. Proper transaction processing provides security for all parties involved. For you, the merchant, following these required guidelines will provide you with greater security regarding the authenticity of the cardholder and the card, while also keeping you compliant with MasterCard and Visa regulations. Failure to comply with these requirements may result in increased losses of revenue, assessment of fines and/or penalties, and possible termination of your merchant account. In addition to the requirements below, please also review Chargeback Prevention, Merchant Account Expense Management, and your Merchant Agreement for additional tips on minimizing exposure to risk and keeping account fees to a minimum.
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DO... |
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Display the MasterCard and Visa logos prominently to advise your customers that these cards are accepted at your place of business, either in your storefront location or on your website.
Accept any MasterCard or Visa when presented regardless of the issuing institution or other discriminating factor. |
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Check the valid date (if available) and expiration date of the card. Accept only cards between those two dates.
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Compare the account number embossed on the face of the card to the account number displayed on the terminal, printed on the receipt from the terminal, and imprinted on the signature panel on the back of the card. Contact the Authorization Center at (800) 228-1122 if any of these account number comparisons do not match. |
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Compare the first four digits of the account number embossed on the face of the card to the four digits pre-printed on the face of the card directly below the account number. Contact the Authorization Center at (800) 228-1122 if any of these do not match.
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Obtain an authorization code for each transaction regardless of the dollar amount. Obtain the authorization code for the full amount of the transaction . Record the authorization code on the sales draft. |
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Verify the hologram on the front of each card. MasterCard holograms are interlocking world globes. Visa holograms reflect a flying dove. Contact the Authorization Center at (800) 228-1122 if the card does not include a hologram or it appears counterfeit. |
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Contact the Authorization Center with a "Code 10" request when there is any suspicion regarding the authenticity of the card and/or cardholder. |
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Obtain the cardholder's signature on all sales drafts. Compare the signature obtained on the sales draft with the signature on the back panel of the card. If the card is unsigned, require the cardholder to sign the card in your presence and ask for additional identification to verify the signature. Please note that "See I.D." in the signature panel is not considered a valid signature.
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Obtain a manual imprint of the face of the card if the card's magnetic stripe is unreadable through the terminal or if the terminal is otherwise inoperable or unavailable. You may key the card information into the terminal for processing; however, the imprint of the card provides proof that the card was physically present during the transaction. |
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For non face-to-face transactions, request the three-digit code printed directly after the account number on the signature panel on the back of the card. Include this code in your authorization request.
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Keep all cardholder information on file for a period of no less than three (3) years from the date of the transaction. Secure all cardholder information to prevent unauthorized access. After the three (3) year period, destroy all cardholder information to ensure it is unreadable.
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Record the following information on all sales drafts: |
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Business name |
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City and state of business location and/or website address |
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Transaction amount |
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Transaction date |
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Card account number |
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Card expiration date |
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Cardholder's name and/or signature
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Authorization Code |
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Description of merchandise or services provided |
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Present the cardholder with a completed sales draft for each transaction. |
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Include any return/cancellation policy in writing on a sales draft or other sales document that is signed by the cardholder. Only such policies that are in writing and signed for by the cardholder are considered valid notification by MasterCard and Visa.
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DO NOT... |
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Establish a minimum or maximum transaction amount above or below which you prohibit the cardholder from completing a transaction using a MasterCard or Visa.
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Impose a surcharge to the customer for payment with a MasterCard or Visa. A discount from the normal price may be offered for the customer to pay with cash or by other means.
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Attempt to re-authorize a transaction for which you previously received a "decline" response. Instead, request an alternate form of payment from the cardholder.
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Split a single transaction into multiple transactions to avoid any type of authorization request. A single transaction may only be split in a deposit/balance scenario. In this case, the sales drafts must reflect "deposit" and "balance" respectively. This does not apply if separate items are placed on separate sales drafts and a separate authorization is obtained on each sales draft or if multiple cards are presented for one transaction and a separate authorization is obtained for each separate card transaction. |
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Charge a MasterCard or Visa for any transaction representing an uncollectible debt owed by the cardholder or is due to the return of a cardholder's check. |
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Charge a MasterCard or Visa for any incidental charges, such as damages, without the cardholder's written authorization. |
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Process a transaction prior to delivery of merchandise or rendering of services. You may obtain an authorization code only at the time of the transaction to ensure the validity of the card and availability of the funds.
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Distribute, provide, sell, purchase, publish, or exchange cardholder and/or account information in any form obtained through MasterCard or Visa transactions. |
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Issue credit to the cardholder on a MasterCard or Visa card if the original sale was not also made on that same MasterCard or Visa card. For example, if the cardholder paid for the original sale in cash and returns the merchandise, the refund may not be placed on a MasterCard or Visa card. |
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CHARGEBACK PREVENTION |
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A chargeback occurs when the cardholder's bank returns a transaction either due to a cardholder's dispute or when the transaction was not properly authorized. Please note that obtaining a valid authorization code only ensures the card is valid, has not yet been reported lost or stolen, and has funds available. It does not ensure protection against chargebacks of any type. Some of the most common reasons for chargebacks include:
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A retrieval request was not fulfilled within the required time frame with valid sales documentation.
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A valid authorization code was not obtained prior to the transaction being processed. |
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The authorized cardholder claims that he/she did not make, engage in, or authorize the transaction. |
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The cardholder claims that the services have not been provided or merchandise has not been received. |
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The cardholder claims that the shipped merchandise was not as represented, received in defective condition, or otherwise unsuitable for the purposes sold. |
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The cardholder has not received credit for returned merchandise, a cancelled transaction, or credit acknowledgement received from the merchant.
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In general, the cardholder may dispute a transaction within 120 days from the transaction date; however, there are many exceptions to this rule. Do not credit the cardholder's account upon receipt of a chargeback as the cardholder has already received credit from his/her bank.
If you receive a chargeback for which you have already credited the cardholder, or you believe you have the required documentation in order to dispute the chargeback, you may provide a rebuttal. For specific information on a chargeback, please contact the Merchant Services Department at (800) 455-9722.
Although it is not possible to guarantee protection against a chargeback in all cases, listed below are prevention guidelines to protect you against the majority of chargeback scenarios. In addition to the guidelines below, please also review the Processing Guidelines and your Merchant Agreement for additional tips on minimizing exposure to risk.
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Respond to all retrieval requests within 72 hours from the date of the request. Failure to respond to a retrieval request may result in a chargeback for which you have no recourse. All sales documentation should include the following information: |
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Business name |
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City and state of business location and/or website address |
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Transaction amount |
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Transaction date
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Card account number |
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Card expiration date |
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Cardholder's name and/or signature |
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Authorization Code
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Description of merchandise or services provided |
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Process only transactions for which a positive authorization code has been received for the full amount of the transaction. Do not process a transaction without an authorization request or one that has resulted in a "decline" response.
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Settle all transactions (close your batch) daily. This will ensure the authorization codes received for the transactions are still valid, customers receive any credits promptly, and will also assist you in obtaining the lowest possible discount rate for the transaction.
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Obtain a card imprint and the cardholder's signature for every face-to-face transaction. A card imprint may be obtained either by swiping the magnetic stripe through a terminal or obtaining a manual imprint of the face of the card. The card imprint and the cardholder's signature provide proof that both the card and the cardholder were physically present during the transaction. All non-face-to-face transactions such as mail / telephone order and electronic commerce pose high chargeback exposure for which there is minimal recourse available to the merchant. |
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Request an Address Verification Service (AVS) code for all non-face-to-face transactions to verify that the address the cardholder provides matches the billing address of the cardholder's MasterCard or Visa statement mailing address. An AVS request is also a requirement for all non-face-to-face transactions to obtain the lowest possible discount rate. |
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Detail the return/cancellation policy on the sales draft or other document within close proximity to the cardholder's signature, including any cancellation/restocking fees. Although return/cancellation policies which are displayed on websites, posted on signage, verbally delivered to the cardholder, etc., will significantly reduce your occurrence of chargebacks, MasterCard and Visa will ultimately only recognize policies in writing and signed by the cardholder as valid notification.
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Process a transaction only after merchandise has been delivered or services have been provided. You may obtain an authorization code at the time of the transaction to ensure the validity of the card and availability of the funds. |
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Obtain signed proof of delivery for all shipments to the customer. MasterCard and Visa only recognize shipment tracers signed for by the customer as valid proof that a customer actually received merchandise that they were charged for. |
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MERCHANT ACCOUNT EXPENSE MANAGEMENT |
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The primary expense in maintaining a merchant account to process MasterCard and Visa transactions is the Interchange rate assessed on each transaction. The Interchange rate (also commonly referred to as the "discount rate") is a percentage deducted from each transaction amount that is assessed to the merchant for the ability to accept the card as a payment. These fees are governed directly by MasterCard and Visa and are assessed to all merchant processors. The lowest discount rates are assessed to the "safest" transactions, posing the least financial risk to all parties involved. Transactions possessing the characteristics below typically obtain the lowest possible discount rate available, therefore lowering the total expense incurred to your merchant account. |
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Face-to-Face Transactions (Card present)
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The card's magnetic stripe is swiped through the terminal and electronically read.
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An electronic authorization for the exact sale amount is received . Voice or telephone authorizations do not qualify for the lowest discount rate.
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The authorization request and settlement of the sale are a single transaction. "Ticket only" transactions do not qualify for the lowest discount rate. |
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The batch is closed within one (1) calendar day from the date of the authorization request(s). |
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Business, Corporate, or foreign cards do not qualify for the lowest discount rate. |
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Non-Face-to-Face Transactions (Mail / Telephone Order, Electronic Commerce) |
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An electronic authorization for the exact sale amount is received1. Voice or telephone authorizations do not qualify for the lowest discount rate.
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An order number is entered into the terminal or software for the transaction. |
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An Address Verification Service (AVS) request is initiated.
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The batch is closed within one (1) calendar day from the date of the authorization request(s).
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Business, Corporate, or foreign cards do not qualify for the lowest discount rate.
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