Category Archives: managing costs

managing the cost of credit card processing for merchants

Updated Card Absent Chargeback Rule – 540 days

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Business to business, automotive  and parts dealers, are especially stung by chargebacks for disputes relating to the quality of merchandise or services received. Effective for transactions processed on or after April 18, 2015, is a new clause that can increase the chargeback period from 120 days to 540 days for US and Canada.

Both Visa and MasterCard have implemented the new rule. I didn’t find a similar rule in a quick research of Discover and American Express, but my research was not exhaustive.  The rules are not identical and readers are advised to read the rules thoroughly, as this article does not include the full context for when the rule applies.

Visa Core Rules and MasterCard Chargeback Guide October 30, 2014:

  • Visa Chargeback Reason Code 53 – Not as Described or Defective Merchandise
  • MasterCard Reason Code 4853—Cardholder Dispute—Defective/Not as Described

One goal of the MasterCard rule appears to be providing customer recourse for ongoing interrupted services. The customer paid for something, they complained and worked it out within 120 days, but then there were recurring quality issues.

They both make it clear that a customer does not have to return goods and services in order to dispute at a later date. This is a change from the old rule.

How can merchants protect themselves in a dispute for these reasons?

  • Written return policy and proof of acknowledgement
  • All guarantees in writing acknowledged
  • Signed sales orders; include specific deliverables and policies at the time of agreement
  • All written communications, including emails, prior to and after the sale as part of the dispute process.
  • Save a log of phone calls with who, what, when, to submit as evidence.
  • For online payments, require check box to acceptance of your terms of sale

Note: the 540 day rule has been in existence, however, the rules have been updated with more specificity, certainly for Visa.

Level III processing in Quickbooks

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Woohoo! Finally, a solution for B2B merchants wanting level III processing for corporate, purchasing, and business cards.  With our connectors, Quickbooks Pro, Premier and Enterprise users can process transactions with a regular merchant account and have invoices marked as paid, avoiding double entry of payment processing outside Quickbooks.

interchange management

Automated interchange management combined with level III processing maximize merchant profits.

Example of a wew low interchange rate a merchant transaction qualified for.

Example of a wew low interchange rate a merchant transaction qualified for.

All payment activity is on a separate level 1 PCI compliant server, removing the application from scope for PCI compliance. Optional electronic bill presentment and payment is also available, including with level III processing.

How long is a credit card authorization valid for?

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The short answer is, all preauthorizations, expire within 24 hours for swiped transactions and 3 business days for non-swiped card-not-present transactions. Preauthorizations are an ‘open to buy’ hold on a customer credit card. While merchants can still settle transactions after an expired authorization, it impacts fees and chargeback risk from disputes. This answer addresses manufacturers,  distributors, and business to business companies that process orders with future deliveries, some that can take days, weeks, or even months.*

“Authorizations and preauthorizations are commonly misunderstood”, according to Christine Speedy, 3D Merchant sales. “Merchants frequently say, ‘I’ve never had a problem settling a transaction that was more than 5 days in the past’. That’s true, but the downside is cost and risk management. In order to qualify for the lowest merchant fees for any transaction type, merchants must have a valid authorization. Additionally, if there’s a dispute, without a valid authorization, the risk of loss is significantly higher.”

Since it’s inefficient and nearly impossible for merchants to manage identifying when authorizations have expired for open buys, or when related rules change, a rules-based cloud payment system is critical. With automation to manage proper authorization and settlement, merchants will reduce merchant fees with any merchant account, and reduce risk.

CenPOS is a merchant centric payment platform that solves this and other complex credit card processing problems. Sales Christine Speedy 954-942-0483.