Bank cards become invalid after their expiration dates and should not be accepted for payment. It would seem that most every merchant, or cardholder for that matter, should be quite clear on that point. Yet, the fact is that expired cards are being accepted and there is even a special reason code that designates the type of chargeback that issuers initiate when they receive such transactions.
However, not all transactions involving expired cards should be charged back. In this article I will review the circumstances under which Reason Code 73 can be used and suggest actions you can take in response, if the chargeback is invalid or improper.
What Is Reason Code 73
Chargeback Reason Code 73 can be initiated when both of the following conditions are met:
- A merchant accepts a card after its expiration date and
- An authorization approval was not obtained from the card issuer.
So Reason Code 73 is only valid when the issuer gave no authorization approval for the disputed transaction, whether or not the card had expired.
How to Respond to Reason Code 73
Keeping the above definition in mind, your actions in response to a Reason Code 73 chargeback will be determined by the particular circumstances, the most common of which I have listed in the table below:
|The card had not expired (in a key-entered transaction).||When processing key-entered transactions, you should always take a manual imprint of the front of the card on the sales receipt. The expiration date should be clearly visible on the imprint and if it shows that the card had not expired at the time of the transaction, send a copy of the receipt to your processor. The chargeback is invalid, whether or not an authorization approval was obtained.|
|The card had expired and an authorization approval was obtained.||If the card was swiped or a manual imprint made and an authorization approval was obtained as required, inform your processor of the transaction date and amount. In fact, many processors automatically manage this type of chargeback, so you will never see it.|
|The card had expired and no authorization was obtained||There is no remedy and you should accept the chargeback.|
|The card had expired and an authorization approval was obtained (in card-not-present transactions).||If the transaction was a MO / TO or e-commerce one and an authorization approval was obtained, inform your processor of the transaction amount and date. Again, processors automatically manage this type of chargeback, so you should never see it.|
How to Prevent Reason Code 73
There is not much to be said about preventing this type of chargeback in a face-to-face setting. Staff should always check the expiration date on the front of the card, as well as all other security features, and never accept for payment one that has expired. We have written previously on how to recognize counterfeit cards, so you should be able to reject those as well (and make a Code 10 call), even when they show an expiration date that is in the future.
The circumstances are obviously much different in MO / TO and e-commerce transactions, where you rely on your customer to provide valid information. However, as long as you have obtained an expiration date, included it into your authorization request and the issuer has approved it, you have done your job and the transaction cannot be charged back to you (at least for that reason), even if the expiration date turns out later to have been invalid. So make sure that you always ask your customers for their cards’ expiration dates when accepting payments over the phone and make the “expiration date” field in your e-commerce website’s checkout form mandatory.
Reason Code 73 is one of the easiest chargebacks to prevent, provided the point-of-sale staff is adequately trained and consistently checks the cards’ expiration dates before completing transactions and obtains an authorization approval when the card has expired. For card-not-present transactions you should always request an authorization, as the floor limit is always zero, and if the card has expired the response will be a decline.
So if you do receive a valid Reason Code 73, the first thing you should do is examine your payment acceptance procedures and identify the issue that caused the chargeback. Most likely it would be a case of insufficient training or of negligence on the part of the point-of-sale person, both of which should be addressed immediately.
Image credit: Flickr / 401(K) 2013.