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Your Online Learning Class to Bankcard Processing

Authorization Process

When choosing a bankcard service provider its important to construct a relationship with someone that has extensive industry knowledge. In essence you trust an organization with your money, revenue and financial well being of your company.

Put your trust in our hands. Ameribanks Inc. has 30 years of combined bankcard experience. Our highly trained staff of Customer Account Executives will create a bankcard program that is specifically created to your Industry, Processing Volume, Services and target market. We go beyond the basics of accepting a credit card.

To familiarize yourself with the Authorization and Settlement process, we have included educational material below to assist in learning about the bankcard industry.

Let’s look at how an electronic Authorization is accomplished:

Authorization can happen in two ways:

· Electronic

The merchant swipes the card through a credit card terminal or point-of-sale (POS) device (or manually enters the card number) and the POS device sends the transaction data electronically for authorization.

· Voice Authorization

The merchant calls the Voice Authorization Center. The Voice Authorization Center has a computer system that communicates with Issuing Banks to relay the transaction data. An operator gives the merchant the Authorization response that is received from the Issuing Bank.

The majority of Authorizations are obtained electronically. However, if a merchant does not have a terminal, if the terminal is not working, or if the Issuing Bank requests more information from the merchant before an authorization can be given, the Authorization can be obtained from the Voice Authorization Center.

· STEP 1 - Authorization of the Purchase

The transaction begins when you purchase goods or services using a credit or charge card. Before the sale can be completed, the merchant must get Authorization from the Issuing Bank that the card can be accepted.

A transaction can happen in one of two ways:

· Face-to-Face Transaction

In a face-to-face transaction, you are present with your credit card in the merchant’s establishment at the time of the sale. The merchant must swipe your card through the terminal, which reads the magnetic stripe on the back of the card. That stripe contains the card number and other identifying information.

Sometimes the magnetic stripe on a card becomes damaged and the terminal cannot read the information on the stripe so the merchant cannot swipe the card through the terminal. When this happens, the merchant must make a physical imprint of the card to prove that it was present at the time of the sale. The card number and expiration date must be keyed into the terminal manually for authorization.

· Mail or Telephone Order

In a Mail Order or Telephone Order transaction, you place an order by mail or phone. Neither you nor your credit card is present at the merchant’s establishment at the time of the sale. The merchant must verify your address in a mail or telephone order transaction by using the Address Verification Service (AVS). The terminal will ask the merchant to enter at least your Zip Code. The merchant will key in the card number since he doesn’t have your card to swipe.

· STEP 2 - The Host

The terminal sends the transaction information to the Host computer, which reads the card number and determines where to route the message so that it gets to the correct card Association, i.e. VISA, MasterCard, Discover.

· STEP 3 - The Issuing Bank

The Host sends the message to the Issuing Bank through the VISA or MasterCard network. The bank determines whether the credit card can be accepted and sends a response back to the Host.

The Issuing Bank can send back one of four responses to a merchant:

· Approval Code

This response indicates that you have sufficient credit available to complete the sale and you have not reported the card lost or stolen. The merchant records this code on the sales draft. An approval code is not a guarantee of payment.

· Declined

This response indicates that the Issuing Bank will not approve the charge. There are many reasons for this - the charge may exceed the amount left on your credit line, for example. The merchant should ask you for another form of payment. The merchant is not given the reason for the decline. If you want to know why the sale was declined, the merchant should direct you to the Issuing Bank.

· Declined Pick-Up

This response is given when the Issuing Bank wants the card returned for some reason. The merchant is not required to keep the card - it should only be kept if he or she feels it can be done safely. The merchant should refer you to the Issuing Bank to find out why the card is to be picked up. If the merchant does keep the card, there is generally a reward. He or she should cut the card lengthwise across the magnetic stripe and send it to the security department in Knoxville. The merchant should include with the card his or her merchant number, address, and the date the card was picked up.

· Referral or “Call Auth”

This response indicates that the Issuing Bank wants the merchant to call the voice authorization center, which will either give an approval code or ask the merchant to get additional information that the Issuing Bank has requested, such as your address or mother’s maiden name. The voice authorization operator will give the requested information to the Issuing Bank and the Issuing Bank will either approve or decline the sale.

· STEP 4 - The Host

The Host reads the Terminal ID (TID) Number included in the message and sends the Issuing Bank’s response to the merchant’s terminal.

· STEP 5- The Merchant Receives the Response

If the Issuing Bank authorized the transaction, the authorization code is recorded on your credit card slip.

· In a Face-to-Face transaction, you sign the slip, the merchant checks your signature against the one on the back of the card, and you leave the store with your merchandise.

· Your signature is not possible in a Mail or Telephone Order transaction because you are not present to sign the slip. The merchant settles the transaction to your card as soon as the merchandise is shipped out to you.