Tuesday, June 5, 2012

How to Accept Credit Card Transactions the Right Way

How to Accept Credit Card Transactions the Right WayMerchants that accept credit card transactions know full well that they begin and ends with the cardholder. Between the time when the cardholder presents the a card for payment and obtains the products or services, however, a huge deal of information is exchanged, examined, analyzed and processed. A process that in all takes only seconds at the point of sale is in fact a highly complex one.

For all transactions, retailers need obtain an authorization approval. The authorization procedure starts when a retailer submits an authorization request to the issuer. Then the retailer receives an authorization response that they use, in some part at least, to decide whether or not to proceed with the sale.

The goal of an authorization is to provide the retailer that accepts credit card transactions with data that will help them to decide whether or not to proceed and complete the sale. When a cardholder offers a card for payment, the merchant account holder is mandated to obtain an approval from the issuer. A number of point-of-sale (POS) systems can be utilized to obtain an authorization approval (for example personal or host computers or terminals). Once the retailer obtains from the issuer a six-digit approval code, the sale can be submitted for payment.

It is important to understand that a transaction authorization approval is not in any way a guarantee that the sale will be accepted without a chargeback, nor does it offer an insurance that the consumer making the sale is the real cardholder, or that the merchant will at the end be paid or, for that matter, that the sale is valid.

Retailers can receive one of the following most typically received responses to a request for an authorization approval. Such responses are generated by the issuers and transmitted by the processor to the merchants that accept credit card transactions. The precise wording may vary, however the responses will be as follows:
  • Approved.
  • Declined or card not accepted.
  • Please call or referral.
  • Pick up.
Retailers that process payments electronically in a face-to-face environment are required to transmit the entire magnetic stripe information together with their authorization request via their POS terminal. Getting an electronic approval can at times be impossible due to POS terminal limitations, system outages and any other disruptions that may occur along the way. In such instances, the retailer needs to validate the card's physical presence, and get a voice authorization.

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