Posts Tagged ‘Chargebacks’

This is a great video that explains chargebacks.  VMS-Washington encourages all business owners to learn more about credit card processing so they can save more money on their processing, learn better ways to processing and to know right from wrong when talking to a potential credit card processor.

If you’re interested or want more information about interchange and better rates from an “A Rated” company contact us, VMS-Washington is giving businesses the Summer Deal of the Year.  For a limited time we are offering rock bottom rates for new and existing businesses.  The questions we always ask business owners are:

  • Have you checked out your current or potential merchant service company on the BBB?
  • Does your current provider or potential provider promote your business?
  • Does your current provider or potential provider send referrals your way?
  • Are you getting the best rates in town?
  • Has your current or potential merchant told you about the Durbin Amendment?

Wouldn’t you want an A rated company that and will promote your business though their social media and monthly newsletters.  For more information contact us.

Thank you,

VMS-Washington
washington@valuedmerchants.com
www.vms-washington.com
800.531.8575 ext.697

VMS-Washington – Recurring Payment Plans

 

Recurring payment plans. Recurring payment plans exist when multiple transactions are processed at predetermined intervals, as a result of an agreement for the purchase of products or services that are provided over time. A cardholder authorizes a merchant to charge his or her payment card on a regular basis (usually monthly, but it can be at other intervals) for a period of time, however the interval between any two consecutive transactions cannot exceed one year. The transaction amount can be fixed or it can vary. The recurring payment plan is in effect until canceled by the consumer. A good example is a newspaper subscription where a consumer can be making payments indefinitely, until the subscription is canceled. A recurring plan differs from an installment payment plan in that in the latter you have a fixed amount to be paid and the installments are agreed upon in advance and made until paid in full.
Benefits. Recurring payment plans help simplify the process of billing a cardholder for a product or a service that is being provided on a continuous basis. The main benefits that merchants get from a recurring payment plan are that it reduces costs, associated with the processing of a single payment, while simplifying the billing process and saving time. Recurring payments also help increase customer loyalty, increase efficiency and improve the cash flow by ensuring timely and regular payments.
Key features. A typical merchant / customer relationship involving a recurring payment plan features the following characteristics:

  • A consumer agrees to receive ongoing services or goods until the contractual arrangement with the merchant is canceled.
  • The consumer gives permission to the merchant to bill his credit card account on a recurring basis.
  • A transaction amount is agreed on that may be a fixed amount or may vary with each billing.
  • A recurring payment relationship consists of more than the initial transaction, with future payments occurring on a regular cycle: weekly, monthly, etc., but not to exceed twelve months.

Installment payment plans. Installment payment plans are similar to recurring ones, however there is a distinction. Installment payment plans consist of a single purchase of goods or services that is billed to an account in multiple segments, over a period of time. A good example would be a car purchase, where a consumer has agreed to receive a loan for a portion of the purchase amount and to repay that loan over a specified period of time.
Recurring vs. installment payment plans. The distinction between recurring and installment payment agreements is that a recurring transaction is payment for goods or services that are received over time, whereas an installment transaction represents a single purchase, with payment occurring on a schedule agreed by a cardholder and merchant.
Recurring Payment Indicator. Recurring Payment Indicator is used to identify recurring transactions within authorization and settlement messages in card-not-present environment. The Recurring Payment Indicator is required in all authorization and clearing records. Recurring transactions are typically lower risk than single transactions and should be approved, provided the account is in good standing.
Recurring payment plan best practices. For best results and to minimize customer disputes, merchants should incorporate into their billing procedures the following best practices:

  • Allow customers to choose the billing date. They know best when the money will be available.
  • Inform the cardholder how your business name will appear on their card statements. Ensure that the “Doing Business As” name, or some other name, easily recognized by the cardholder, is used when billing or corresponding with the cardholder. Your processing bank will be able to set your billing descriptor to show the desired name.
  • Provide a clear statement of your cancellation policy on the cardholder’s agreement and your website. This will help minimize chargebacks.
  • Provide the cardholder with clear information regarding the billing arrangements, all charges related to the delivery of products and services.
  • Ensure that billing is discontinued immediately upon the cardholder fulfilling the cancellation terms and provide the cardholder with cancellation confirmation including when the last billing will occur if this has not already occurred, or if a credit is due when the credit will be processed.
  • Ensure that the cardholder is notified when goods or services cannot be delivered or provided on the agreed upon date.
  • Provide the cardholder with an easily accessible contact number for customer service inquiries, and also the right to terminate the recurring transaction.
  • Ensure an authorization request is made and approval is obtained before a payment is submitted forclearing.
  • Make sure that all transactions reflect the Recurring Payment Indicator.
  • Contact the cardholder to obtain alternative account billing details if the authorization response is a decline.

Merchant pre-billing notification. You should provide a merchant pre-billing notification prior to submitting an authorization request for a recurring transaction and you will see less customer disputes and chargebacks. Following is a sample of such a notification.
“To: customer name@account.com From: merchant name@account.com

Subject: Recurring transaction notification Date: 8 March 2012 03:15:02 -0500

Dear Customer Name,

This email confirms your authorization* of the

transaction listed below, entered on 01/03/2012 at 3:14:49 AM

has been processed and will be debited from your account.

Transaction Origination Date: 01/03/2012

Name on Account: Cardholder Name

Amount: $14.95

Description: Approved recurring charges on 2012-03-08

*You have authorized Valued Merchant Name Services,  and your

financial institution to initiate the transaction

detailed below. You have acknowledged that the origination

of debit or credit transactions to your account must comply with

the provisions of local laws. This authorization is to

remain in full force and effect until Valued Merchant  Services,

Inc has received written notification from you of its

termination in such time and manner as to afford

Valued Merchant Services, Inc and your financial institution a

reasonable opportunity to act on it.

Processed for: Valued Merchant Name Services

Phone #: 800-531-8575

Email: washington@valuedmerchants.com”

Learn how to lower your card acceptance cost: www.vms-washington.com and ask about the Durbin Amendment that was passed on October 2011 and how it will help you lower your rates.

VMS-Washington – How Processors Manage Merchant Accounts with High Levels of Fraud

The Credit Card Associations of Visa and MasterCard maintain the Global Merchant Audit Program (GMAP) to monitor merchants processing an excessive number of fraudulent transactions. GMAP is a rolling six-month database that identifies merchants that for any one calendar month have:

  • At least three fraudulent transactions.
  • A cumulative total of at least $2,000 in fraudulent transactions.
  • A minimum fraud-to-sales volume ratio of 1%.

Merchants identified under the GMAP program are divided into the following three tiers based on their fraud-to-sales volume ratio in any one month:

  • Tier 1 – fraud-to-sales volume ratio minimum of 1% and not exceeding 3.99%.
  • Tier 2 – fraud-to-sales volume ratio minimum of 4% and not exceeding 6.99%.
  • Tier 3 – fraud-to-sales volume ratio of at least 7%.

If a merchant is identified in Tiers 1 or 2 more than one time in a 12-month period, it will be automatically escalates into the next higher tier. If a merchant is escalated into Tier 2, the processor is required to provide it with additional training on fraud control. If a merchant is escalated into Tier 3, the processor is required to decide whether to accept liability for fraud related chargebacks or to terminate the merchant account.
If a merchant is identified in any one of these tiers, it should expect certain actions from its processor. Some of these actions are required by Visa and MasterCard, for others the processor will follow its own policies.

  • Tier 1 merchants. When a processor is notified that one of its merchants is placed into Tier 1, there is no requirement that the processor respond formally to the notice. A Tier 1 notice is provided for information only. The merchant should expect, however, that the processor will implement a fraud control program or enhance an existing one.
  • Tier 2 merchants. When a processor is notified that one of its merchants is placed into Tier 2, it is required to conduct training on credit card acceptance and fraud control procedures at the merchant location. The Credit Card Associations (Visa and MasterCard) do not require processors to terminate the merchant account, although the processor can do it, if that is its policy. The more likely scenario is that the processor will implement a rigorous fraud control program.
  • Tier 3 merchants. When a processor is notified that one of its merchants is placed into Tier 3, the Associations require that it must either terminate the merchant account or accept liability for chargebacks for all reported fraudulent transactions (except fraudulent application and account takeover fraud) during the applicable chargeback period. The chargeback period will be determined to be a minimum of six months or a maximum of 12 months. Most likely, the processor will terminate the merchant account.

Should the processing bank choose to accept chargeback responsibility, the merchant will be placed into the Global Security Bulletin with the applicable chargeback liability period. Issuers will then have the right to charge back any fraudulent transaction that occurred during the applicable period, other than the fraudulent application or account takeover fraud types. The chargeback liability period begins on the first day of the month following the month in which the merchant was placed in the GMAP and lasts for at least six months, but it may be increased to a 12-month period.

Why hasn’t your processor mentioned the Durbin Amendment?  Learn how to lower your card acceptance cost: www.vms-washington.com and ask about the Durbin Amendment that was passed on October 2011 and how it will help you lower your rates.

VMS-Washington – How to Manage Chargebacks Resulting from Processing Expired Cards

Visa’s chargeback Reason Code 73 and its MasterCard equivalent Reason Code 4835 are used by card issuers to designate chargebacks resulting from processing credit and debit card transactions where both of the following two conditions are present:

  1. The payment was made with an expired card 

and

  1. The transaction was not authorized.

It should be noted that, if a merchant processes a card-not-present transaction using a card that expired before the transaction date, but the issuer approved the authorization request, the issuer is responsible for the transaction.
A critical point in determining the validity of such chargebacks is establishing the transaction date. For the purposes of Reason Codes 73 and 4835, the transaction date is the date on which the cardholder first presented the card to the merchant. However, for hotel, cruise line, airline or car rental transactions, the applicable transaction date is the date on which the cardholder first checked into the hotel, boarded the cruise liner or aircraft or rented the car, not the date on which the booking was made.
What causes these chargebacks? As the above description implies, Reason Codes 73 and 4835 occur when a merchant does not follow best card acceptance practices and accepts a payment from a card that is past its expiration date and did not obtain an authorization approval from the issuer.
How to manage such chargebacks? Your response to Reason Code 73 and 4835 chargebacks will depend on the particular transaction circumstances and the actions you have taken (or not) so far.

  • The card was not expired in a key-entered transaction. In such cases you should send a copy of the sales receipt to your processor. The chargeback is invalid regardless of whether authorization was obtained. For key-entered transactions, the expiration date should be on the manually imprinted copy of the front of the card, which should also be sent to your processing bank, along with the sales receipt.
  • The card was expired, the magnetic stripe was read and an authorization was obtained. If you had processed an expired card, for which both the magnetic stripe was read and an authorizationwas obtained, inform your credit card processing bank. As indicated above, the issuer is responsible for such chargebacks.
  • The card was expired, the magnetic stripe was not read and an authorization was obtained. If you had processed an expired card for which the magnetic stripe was not read but an authorizationwas obtained, send a copy of the sales receipt to your processor with the manual imprint of the front of the card, and ask them to include the authorization log in the re-presentment.
  • The card was expired and no authorization was obtained. If you had processed an expired card for which no authorization was obtained, there is no remedy and you should accept the chargeback.  Do not process a credit at this time, as the chargeback has already performed this function.

How to prevent chargeback Reason Codes 73 and 4835? Prevention of these chargebacks is entirely within your control and once again adequate training of your sales staff is the most effective tool at your disposal. A simple but very effective preventive measure is to check the expiration date of the card, presented by the customer, and to not accept payments if the card has expired. You should ask for an alternative payment method instead.

Learn how to lower your card acceptance cost: www.vms-washington.com and ask about our $250.00 guarantee that we can beat your current processor’s rate.