Credit Card Processing Blog

All types of unattended point-of-sale (POS) terminals can be programmed to not process credit card transactions above a pre-set amount. There are also, however, limits on the highest allowable amounts that merchants can process on cards at unattended terminals, which are set by the Associations and exceeding them leads to automatic chargebacks.

Visa issuers use Reason Code 96 to designate chargebacks resulting from transactions that exceed the limit. In this article I will review the specific circumstances in which this reason code can be used and what merchants can do to prevent or remedy it.

What Causes Reason Code 96

Chargeback Reason Code 96 is initiated by Visa issuers when they receive a transaction that exceeds the allowable amount from a Limited-Amount Terminal, a Self-Service Terminal, or an Automated Fuel Dispenser (AFD) transaction. The specific cause will be that the merchant processed a transaction from:

• A Limited-Amount Terminal and exceeded $25.
• A Self-Service Terminal (excluding AFD) and exceeded $50.
• An AFD and exceeded:
  • $150 for Visa Fleet cards.
  • $75 for all other cards.
  • $500 for a real-time clearing transaction.

This reason code is used for international transactions as well, but the conditions are different and I will not review them here.

How to Respond to Reason Code 96

As with all other types of chargebacks, your response to a Reason Code 96 will be determined by the specific circumstances, the most typical of which are listed in the table below, along with my suggestions on the course of action you should take:

*For AFD transactions, the chargeback amount is limited to the amount exceeding the specified amounts listed above.
**To avoid such chargebacks, make sure that your processor has programmed your convenience store and AFD terminals with the correct Merchant Category Codes (5541 and 5542, respectively).

How to Prevent Reason Code 96

The only thing you need to do to prevent this type of chargeback is to make sure that your POS terminals are properly set with the transaction amount limits, so that your customers are not allowed to complete a transaction above this threshold. Your processor and terminal vendor should be able to help you do that. In fact, your processor should be proactive in setting the applicable limits.

The Takeaway

Unlike most other types of chargebacks, the actions of your customers have nothing to do with Reason Code 96, which is entirely the result of improper POS terminal set-up. It is arguable whether or not you should be aware of the allowable amounts applicable to the types of transactions you process at your terminals. What is not at all arguable, however, is that your processor should know what these limits are and should ensure that your terminals are compliant. If they failed to prepare you for something as basic as that, what else may they have missed?

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management Kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Every now and again you would have a customer who would swipe her card at the checkout, but then suddenly change her mind and ask to make a payment in some other way. That is perfectly acceptable and it’s happened to many of us. I, for one, have often automatically pulled my primary credit card out of my wallet to make a payment, only to remember at the last moment that using another card at this particular merchant this month would give me a five percent cash back.

Now, whenever you find yourself in such a situation, all you have to do is void the initial transaction or, if it is too late for that, issue a credit for it and that’s the end of the story. However, if you do complete the transaction using another form of payment, but still deposit the initial credit card payment, the latter will come back to you in the form of a chargeback Reason Code 86, which I will examine in this article.

What Causes Reason Code 86

Chargeback Reason Code 86 is initiated by issuers when they receive a complaint from one of their cardholders who claims that she paid for the disputed transaction by other means (for example, cash, check or another type of card).

As mentioned above, a typical situation that leads to a Reason Code 86 arises when a customer offers a card for payment, but then decides to use cash or a check after a transaction receipt is completed. The merchant then erroneously deposits the initial card sales receipt in addition to the cash, check, or other payment method.

How to Respond to Reason Code 86

Listed in the table below are the most typical circumstances you are likely to find yourself into when considering your response to a Reason Code 86 and my suggestions on the course of action you should take:

*If your customer claims that another card was used for payment, your processor should be able to confirm or reject the claim on its own by checking your transaction log.

How to Prevent Reason Code 86

Preventing this type of chargeback comes down to voiding the initial transaction. There are two aspects to this:

• When another payment form is used, void the initial sales receipt. If you have completed a card sales receipt for a given transaction and then your customer decides to use another payment form, make sure you void the first receipt and do not deposit it.
• Train staff to void erroneous sales receipts. This is the crucial part. Sales staff should be well trained in proper procedures for processing transactions where a customer, after initially offering a card, decides to use another payment form. More specifically, staff should be instructed to void the erroneous card sales receipt and ensure that it is not deposited.

Every time you receive a Reason Code 86, you should follow up with the staff involved in the processing of the charged back transaction and provide the necessary training to prevent re-occurrence.

The Takeaway

Reason Code 86 is typically the result of carelessness or poor training on best credit card processing procedures. Both are inexcusable, but need to be addressed differently. Management is solely responsible for providing proper training and bears full responsibility for any issues that can be linked to unpreparedness of the sales staff to perform their duties.

Carelessness, on the other hand, can be more difficult for management to remedy. If a staff member has received adequate training and yet repeatedly commits the same error, she is probably not suitable for the job. In such cases, you would have available multiple courses of action and your decision should be based on the particular circumstances. If, for example, there is another position that you believe may be more suitable to this particular staff member’s abilities, you should talk to her about it. Or, alternatively, you may decide that you should let her go. But don’t leave her at the checkout, as that will be doing no one any favors.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management Kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

I am yet to speak with a merchant who enjoys issuing a credit for returned merchandise or cancelled services. It is sometimes easier to accept having to do it, but it’s never fun. That said, you should always honor a customer’s request for a refund, provided it complies with your return and cancellation policies. In fact, sometimes you may be well advised to process a credit even if the refund request is not entirely compliant with your policies. Otherwise you leave yourself vulnerable to chargebacks, whose validity is determined based on the Associations’ rules, not your policies.

In this article I will review the reasons, conditions, limitations and processing requirements applicable to Reason Code 85, which applies to disputes over credit transactions, and will offer prevention strategies, as well as possible remedial actions you can take in response to this type of chargeback.

What Causes Reason Code 85

Typically, Reason Code 85 chargebacks are initiated when the issuer receives a complaint from a cardholder claiming that she returned merchandise or cancelled services and the merchant did not process a credit. This chargeback is usually caused, because the merchant:

• Did not issue a credit.
• Issued the credit, but did not deposit it with its processor in time for it to appear on the cardholder’s next statement.
• Did not properly disclose or did not apply a limited return or cancellation policy at the time of the transaction.
• Did not issue a credit, because the business does not accept returns, but did not properly disclose its return policy at the time of the sale.

Reason Code 85 can also be caused if the customer:

• Did not cancel a timeshare within 14 days of the transaction date.
• Did not properly cancel a guaranteed reservation or advance deposit transaction.

For this chargeback to be valid, the cardholder must have made an attempt to return the merchandise or cancel the services.

Reason Code 85 Rights, Limitations and Processing Requirements

All of the following conditions apply to this reason code:

• The chargeback amount is limited to one of the following:
  • The amount of the credit transaction receipt, but no more than that.
  • The portion of the merchandise or services returned or cancelled.
• The chargeback is invalid for the cash-back portion of a cash-back transaction.
• The time limit for Reason Code 85 is 120 calendar days from one of the following dates:
  • The date of the credit transaction receipt or
  • The date the customer attempted to return or cancelled the merchandise or services.

Additionally, at least 10 calendar days must have passed from the date of the credit transaction receipt, before Reason Code 85 can be initiated.

Reason Code 85 Re-presentment Conditions

Reason Code 85 chargebacks can be re-presented in one of the following circumstances:

• A credit transaction or adjustment was already processed.
• The chargeback is improper or invalid.
• The issuer did not include required information in the chargeback message text field.

Reason Code 85 re-presentments must be processed within 45 calendar days from the chargeback settlement day.

How to Respond to Reason Code 85

Your response to a Reason Code 85 chargeback will be determined by the circumstances, as follows:

*If your return policy is on the back of a receipt that has been signed on the front and initialed on the back, you must provide your processor with copies of both sides of the receipt. If the return policy is on the back of the receipt and is not signed or initialed, it is considered that you have not provided evidence of proper disclosure.

How to Prevent Reason Code 85

You can prevent Reason Code 85 chargebacks by following a set of best practices. More specifically:

• Issue credits promptly. If merchandise is returned to you or services cancelled in accordance with your policy, issue a credit and send the customer a letter or email informing her that the credit has been issued to her account. Also inform the customer that it typically takes up to five business days to post a credit.
• Credits for gift returns. If a gift recipient returns a gift ordered by mail, telephone, or the internet, you can provide a cash or check refund, an in-store credit, or another form of credit. If the cardholder claims that a credit was not issued to her account for the gift, provide your processor with documentation or information showing that the credit was given to the gift recipient. For charge cards, the credit must be processed to the same account that was used for the original transaction.
• Issue the credit to the same card account. You are required to issue the credit to the same card that was used for the original transaction and give your customer a copy of the credit receipt. For gift cards you can issue a cash refund or in-store credit if the cardholder states that the gift card has been discarded.
• Your return policy must be clearly disclosed on the sales receipts. Your return policy should be located near the customer signature line. If the policy is on the back of the receipt, your customer must sign the front and initial the back. Additionally:
  • If you operate a brick-and-mortar business, post your return policy near the cash register so that it is clearly visible to customers.
  • For internet transactions, require the cardholder to click on an “Accept” or a similar button to acknowledge the policy.
• Timeshare and hotel cancellations. Timeshare and hotel merchants need to provide a proof that:
  • Your customer did not cancel the timeshare within 14 days.
  • Did not cancel a guaranteed reservation.
  • The cancellation code provided is invalid.
• No-return policy disclosure. If you do not allow returns at all, “no returns” or similar words must be printed on all copies of your sales receipts near the cardholder signature line.

The Takeaway

The single most important thing you can do to prevent Reason Code 85 is to issue credits promptly. Not doing so and making it difficult for customers to make returns and cancel services is a sure way to invite unnecessary disputes, many of which will just as surely lead to chargebacks and that is not in your interest. Even if you successfully re-present a chargeback and win the case, you will still have incurred additional back office expenses. Moreover, each chargeback, whether successfully disputed or not, counts toward the one-percent chargeback-to-total-transaction-count monthly limit that you have to comply with. If you don’t, you will get your merchant account terminated. In fact, that will happen before you come even close to reaching the limit.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management Kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

Fraud and chargebacks are the two biggest payment processing-related issues card-not-present merchants have to deal with. If you’ve managed an e-commerce business for any length of time, I have no doubt that you are fully aware of that. Something else that I’m sure has also not escaped your notice is that the two typically come together and you only learn of the fraud when you receive the resulting chargeback.

This is exactly the case with Reason Code 83, which is used to designate chargebacks resulting from processing fraudulent card-absent transactions. In this article I will review the circumstances when issuers use this reason code, how you can respond to it and what you can do to prevent it.

What Causes Reason Code 83

Chargeback Reason Code 83 is used by issuers when they receive a complaint from one of their cardholders who claims that she neither authorized nor participated in the card-not-present transaction at issue or when it was charged to a fictitious account number for which an authorization approval was not obtained. The immediate causes for this chargeback can be one of the following:

• The merchant charged a transaction to a card account that was fraudulently used or
• The cardholder did not recognize the merchant name associated with a transaction on her statement.

Card-not-present transactions include mail order, telephone order (MO / TO), internet (e-commerce), pre-authorized health care transactions, recurring and advance payment transactions, and no-show fees.

How to Respond to Reason Code 83

Listed in the table below are the most likely circumstances you may find yourself into when considering your response to a Reason Code 83 and my suggestions on the course of action you should take:

*AVS and the security codes are fraud prevention tools developed specifically to be used in card-absent transactions. In some cases they provide merchants with a re-presentment right, but do not directly prevent chargebacks.

How to Prevent Reason Code 83

The following best credit card acceptance practices should be implemented:

• Always obtain an authorization approval. All MO / TO, e-commerce and recurring transactions must be authorized, regardless of the dollar amount.
• Read back the account number. For telephone transactions, always verify the account number with your customer to avoid errors.
• Identify the transaction as card-not-present. Use the appropriate code to identify transactions as mail order (”MO”), telephone order (”TO”) or e-commerce (”ECI”) during both the authorization and settlement process. Typically, this will be done automatically by your payment processing system, or by pressing a MO / TO indicator button.
• Use AVS and the security codes. These services are designed specifically to help prevent card-not-present fraud.
• Ensure that your billing descriptor is set up correctly. The way your business name appears on your customers’ transaction activity logs and monthly statements is managed through a tool called “billing descriptor.” Typically, it is set up to display your “doing business as” (DBA) name, although some processors may use your legal name as a default setting. Work with your processor to ensure that the billing descriptor is set up to display the name that is most familiar to your customers, as well as that all other information (e.g. city and state, phone number, internet address) is accurately identified.

Be advised that you are protected from a Reason Code 83 chargeback if the transaction has an Electronic Commerce Indicator (ECI) 5 or 6, indicating a Verified by Visa transaction, so make sure that all of your transactions are accurately identified.

The Takeaway

You cannot prevent all fraudulent transactions that can lead to a Reason Code 83 chargeback, as criminals often have access to all information needed to successfully complete a card-not-present transaction, even when best payment processing procedures are followed and available fraud prevention tools used. However, you can greatly minimize the chance of that happening, because most criminals are not all that sophisticated, nor do they always have all of the account information available to them. This is precisely the type of fraud you have full control over and preventing it should be your top priority. A success on that front will have the beneficial side effect of limiting Reason Code 83 chargebacks.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management Kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).

In recent articles we have reviewed several reason codes issuers use to designate chargebacks caused by processing errors. Various actions can lead to such errors, but one of them stands out above all others: processing a single transaction more than once. Now, as far as processing errors go, I don’t think any other comes closer to the definition.

To an outside observer it may seem that this type of chargeback – Reason Code 82 – can only be caused by merchant fraud. After all, you can’t inadvertently process the same transaction twice, can you? Well, as it happens, even though fraud is a real possibility, more often than not such chargebacks are indeed caused by an error, rather than by design. Let’s take a closer look.

What Causes Reason Code 82

Chargeback Reason Code 82 can be initiated when the merchant:

• Enters the same transaction into the point-of-sale (POS) terminal more than once.
• Electronically submits the same batch of transactions to its processor more than once.
• Deposits with its processor both the merchant copy and the acquirer copy of a sales receipt.
• Deposits sales receipts for the same transaction with more than one processor.
• Creates two or more transaction receipts for the same sale.

Although it may seem as if most of the above actions may only have been taken intentionally, in reality that is very unlikely. See, such discrepancies are discovered immediately and, if processed, the transactions are automatically charged back. So not only does the merchant not benefit in such circumstances, but it is charged a penalty fee, is subjected to a closer scrutiny and it may even have its merchant account frozen until the processor is satisfied that its merchant is processing transactions by the rules.

How to Respond to Reason Code 82

Listed in the table below are the most likely circumstances you may find yourself into when considering your response to a Reason Code 82 and my suggestions on the course of action you should take:

Most processors automatically check if a credit was processed, so you may never see the chargeback.

How to Prevent Reason Code 82

Following best credit card acceptance practices, as always, can help you prevent this type of chargeback. Paying attention when depositing transactions helps too. Here are some specific suggestions:

• Review sales receipts prior to depositing them. Doing so will help ensure that only the processor’s copies – and not the merchant’s copies – are included in the batch. If you send transactions electronically for processing, ensure that each batch is sent only once and has a separate batch number.
• Enter transactions once. Make an effort to avoid entering transactions more than once.
• Void duplicate receipts. If caution fails you and a transaction is entered twice by mistake, immediately void the duplicate. Also void the associated sales receipts.
• Train staff. All new POS employees should be trained on matters concerning duplicate transaction processing, cancellation, and voiding procedures and refresher training should be provided to existing personnel. Back-office staff should be adequately trained on transaction deposit procedures.

The Takeaway

Reason Code 82 has more to do with a lack of attention on the part of the merchant than with anything else. However, carelessness is not an excuse and, while unintentional, such errors are just as costly as any other action (or inaction) that can cause a chargeback. It is up to the management of each business to ensure that proper attention is paid to the processing of every transaction, adequate training is provided and, if duplicate transactions occur often, to discuss the issue with the staff responsible for them.

Learn how to minimize chargebacks and fraud

Learn how to minimize chargebacks and reduce your processing costs. The Chargeback Management Kit contains a video and an e-book:

• E-Book – Chargeback Manual (40 pages).
• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).