U.S. merchants are prohibited from splitting credit card transactions, which they may be tempted to do when the total transaction amount exceeds the authorization limit stated in their processing agreements. In such scenarios, merchants would request multiple authorizations for portions of the total transaction amount, which would all be lower than the limit. We have advised you not to do that, because you will eventually be found out and pay the price for your misbehavior.
There is a special case, however, where partial transaction authorizations are not only allowed but necessary. I will examine it in this article.
What Is a Partial Authorization?
A partial authorization request enables an issuer to approve an amount that is lower than the total transaction amount in cases when the available card balance is not sufficient to cover the full transaction amount.
Partial authorizations are used for prepaid and check / debit cards and are now supported by both Associations, as well as their issuers and payment processing companies. They make it possible for merchants to complete a transaction by using the remaining available balance on the prepaid or check card and accepting an additional payment form (e.g. cash, check or another bank card) for the remaining balance. This type of transaction is known as “split tender.”
Partial Authorization Process
Here is how a split tender transaction is processed:
- The customer swipes a card with available balance that is lower than the sale’s amount.
- The merchant submits an authorization request with a Partial Authorization indicator to the issuer for the entire sale’s amount.
- The issuer sends a partial authorization approval back to the merchant.
- The POS terminal subtracts the partially approved amount from total sale’s amount. In a full service restaurant, the POS device will print out two receipts — one displaying only the partial authorization and a second receipt displaying the remaining balance due plus a blank field for the tip.
- The customer makes a payment for the remaining balance using cash, check or another card.
- The sale is now completed and a receipt is printed displaying the split tender amounts. The current card balance may also be shown (in what is known as “Balance Return”) in one of two ways:
- If less than $200, the POS device prints the exact balance (for example, “Balance Remaining: $87.65”).
- If more than $200, the POS terminal prints “Confirmed,” instead of the amounts (for example, “Balance Remaining: Confirmed”).
If the prepaid card used in a split tender transaction is a gift or an incentive card, the remaining balance is automatically sent to the point-of-sale (POS) terminal where it can be displayed to the merchant and printed on the sales receipt.
Partial authorizations provide you with a way to eliminate declined authorizations due to insufficient funds. You should take advantage of this opportunity and understand how to process them.
There are reasons for authorization declines where there is nothing a merchant can do, but there is no excuse for not preventing the ones that are totally within your control.
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