Published: 28th October 2018
Let’s take a look at Internet Credit Card Processing actually works. Maybe you’ve just opened shop. Or maybe you’ve been in business for years. Either way, if you’re about to accept credit cards from your customers you’re in good company. Here’s why:
This tutorial has been written to help you get the most from credit card processing. It explains how the process works. Plus we outline your rights . . . your responsibilities . . . and how to control the risks (yes, there are risks).
Every business has its vocabulary. This is ours, starting with the parties involved in each transaction:-
When a credit card is used for payment from your website, the following process occurs (usually in a matter of seconds!):
You’ve seen how transactions work. Now we’ll step back and review what keeps the whole credit card system together – Protection & Trust.
Credit cards offer protection for you, your customers, and the banks involved. In fact, protection is why credit cards are safer for everyone.
You accept a credit card (and the transaction is authorised) you can be sure you’ll receive the funds. (Later, we will discuss disputes where funds go back to the consumer.)
The credit card system protects issuing banks from unscrupulous merchants. When you submit a deposit, you are promising the issuing bank that you have delivered the goods and services promised to the cardholder. If you don’t, the issuing bank has the right to charge back the transaction.
Cardholders are protected from merchants who fail to keep their promises. They’re not liable for payment if a merchant fails to deliver as expected.
Trust holds the credit card world together. The issuing bank doesn’t ask a cardholder if he is satisfied before you get your money. They TRUST that the cardholder will be satisfied. Here’s how you earn that trust: When you sell by credit card, you must deliver on the cardholders expectations (note that word!) of your goods and services. What expectations? Think about it. Either by policy or by practice, implicitly or explicitly, you tell customers that they can expect a level of quality, delivery times, etc. By accepting a credit card for payment, you are promising the issuing bank that you are going to make good on those expectations. If not, your customer can get his money back.
Almost everyone has an idea of how a credit card SALE works. But even some experienced merchants don’t know the other side of the system: chargebacks. Understanding chargebacks can save you a lot of money. And help to salvage customer relationships. If a cardholder believes a charge isn’t legitimate, or that their expectations weren’t met, she could come to you for a refund. But she has another, more troublesome, option: Chargebacks. Here’s how chargebacks work: Regardless of merit, the issuing bank is obligated to investigate complaints from cardholders, including:
Some common causes of chargebacks can be avoided easily: If your company name appears one way on your advertising and your receipts, but a different way on the customers credit card statement.
In some cases, this problem results from two businesses attempting to process transactions from the same account. This is frowned upon, so call us if you have a second business.
When you charge the customer before the goods have been shipped. In other words, don’t submit a transaction before you have shipped the goods or performed the service..
Traditionally, the dispute process begins with a Retrieval Request that asks for documentation.
TIP: Reply PROMPTLY to these requests. Late responses almost always result in chargebacks.
If you don’t have documents for the retrieval, or if you don’t deliver a copy of the documents to your processor in time, the cardholder is deemed to be right. When this happens, several things occur:
Besides the obvious financial loss to you, chargebacks are also bad because of that final step.
Heres why. Everyone in the credit card system knows that eventually a few transactions will result in chargebacks. They are a cost of doing business. But, if you cause too many chargebacks, the credit card system will start to doubt you and your standing as a credit card merchant. When chargebacks become too prevalent, your merchant account may be terminated by your sponsoring bank. Then you may find it impossible to find another sponsoring bank. In other words, no more credit card acceptance. Ouch! That is why we are so strict with our fraud screening policies !