Credit Card Processing Blog

Visa uses chargeback Reason Code 77 to designate chargebacks resulting from processing transactions where the account number on the card presented by the cardholder does not match the one on file with the card issuer. MasterCard does not have a reason code that exactly matches Visa’s 77.

What causes these chargebacks? By far the most common cause for a chargeback Reason Code 77 is that the merchant incorrectly key-enters or records a card account number.

How to manage such chargebacks? Your response to Reason Code 77 chargebacks will depend on the particular transaction circumstances and the actions you have taken (or not) so far.

• The account number matches. If the card account number on the sales receipt does match the one on the chargeback and you received an authorization approval from the issuer, contact your processing bank and request that they include their authorization log when they re-present the chargeback. Most processors handle this type of chargebacks automatically and you will never see them.
• The account number doesn’t match. If the card account number on the sales receipt does not match the one on the chargeback, there is no remedy and you should accept the chargeback. Process a new transaction and make sure that the account number is correct. However, do not process a credit at this time, as the chargeback has already performed this function.

How to prevent chargeback Reason Code 77? The following card acceptance best practices will help prevent this type of chargebacks:

• The terminal can’t read the card’s magnetic stripe. For card-present transactions, if the magnetic stripe cannot be read, request authorization by key-entering the account number. Then take a manual imprint from the face of the card onto the sales receipt and have it signed by the cardholder.
• The terminal is not working. If your point-of-sale (POS) terminal is not working, call your processor’s voice authorization center. If you get an authorization approval, be sure to write the response code on the sales receipt. Then take a manual imprint from the face of the card onto the sales receipt and have it signed by the cardholder.
• The embossed account number doesn’t match. If the account number on the terminal or on the sales receipt does not match the one on the front of the card, request a Code 10 call. If you are asked to retain the card, comply only if it is safe to do so.
• Taking orders over the phone. For telephone orders, you should read the account number back to the cardholder to verify it.
• Obtaining authorization. Authorization should always be requested for transactions where the sale’s amount is above the merchant’s floor limit. Floor limits are typically stated in the merchant’s processing agreement. Remember that for all card-not-present transactions the floor limit is zero, which means that they always require authorization.
• Recurring payments. With recurring payments it is possible that, over time, the account number on file can be changed or the account can be closed altogether. If authorization is declined, contact the customer and update the card details. To avoid declined authorizations due to changed account numbers altogether, consider signing up for Visa’s and MasterCard’s automatic card updater services, which enable merchants to update account information on file, as such changes occur.

Your point-of-sale staff should be well trained on employing these best practices, but specifically on comparing account numbers printed on sales receipts to account numbers embossed on the cards. Everyone should understand that, when the numbers differ, the card should not be accepted and a Code 10 call should be made. The phone numbers for voice authorizations should be clearly posted, so that when the terminal is down or the card’s magnetic stripe cannot be read, a voice authorization can be quickly requested. Staff should also be instructed that authorizations are always required for card-not-present transactions.

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).

Accepting Discover card payments is broadly similar to accepting Visa, MasterCard or American Express payments, with a few differences. This post will review the process merchants must follow for each card-present Discover sale they accept.

When a Discover card is presented for payment at the checkout, the merchant is required to perform the following actions:

1. Card expiration date. The first thing you should do is check the card’s expiration date. The card is valid through the last day of the month embossed on it. Merchants are not allowed to accept expired cards and are required to call Discover’s authorization center at 1-800-347-1111.
2. Card signature. Verify that there is a signature on the back of the card and that it matches the name embossed on the front of the card. If the card is not signed, request two pieces of identification, one of which is a picture identification. When you have confirmed that your customer is the cardholder, have him or her sign the back of the card.
3. Obtain authorization. If you are using a point-of-sale (POS) terminal, you are required to transmit the full magnetic stripe data, obtained when the card is swiped through the terminal, with the authorization request. If the magnetic stripe is unreadable and you have to key the transaction information in, you must take a manual imprint, to validate that the card is present. If you fail to take a manual imprint for any key-entered transaction, you will be liable for any resulting chargebacks.

   
   If your POS terminal is unable to connect to Discover’s electronic authorization system, you should call Discover’s authorization center for a voice authorization. Be advised that the floor limit for all Discover transactions is zero, which means that they all must be authorized. Transactions processed without first obtaining an authorization approval may be immediately charged back to you.

   
   For transactions where the merchandise is shipped or the service provided more than thirty days after the order is made, you need to obtain an authorization at the time the order is placed and again immediately before shipping the product or providing the services to the cardholder.

4. Sales receipt. All products and / or services purchased at one time and at one POS terminal must be included on one sales receipt. Split sales, where a merchant uses two or more sales receipts for a single transaction, are not allowed, except for partial payments. The customer must receive a copy of the sales receipt at the time the transaction is completed.
5. Required transaction information. For swipe transactions that are processed electronically using a POS terminal, required information is automatically transmitted to Discover and you are generally not required to obtain a card imprint on the sales receipt. However, if your terminal is not able to read the card’s magnetic stripe, you must obtain a card imprint and include all of the following information on the cardholder’s copy of the sales receipt:
   • The card account number.
   • The cardholder’s name.
   • The card expiration date.
   • The merchant’s name.
   • A description of the purchased merchandise or service.
   • The total amount of the card transaction (including sales tax and / or tip).
   • The transaction date.

   
   For electronically processed transactions, you should compare the account number printed on the transaction receipt to the one on the front of the card. If the two numbers do not match, you should not accept the card.

6. Refunds and returns. If a cardholder returns products or services purchased with a Discover card and in accordance with your return policy, you are required to issue a refund. Your return policy should be clearly displayed and communicated to the cardholder at the time of the sale.

As you see, there is nothing in Discover’s card acceptance requirements that is all that different from Visa’s or MasterCard’s. In general, if you follow the requirements of any of the major credit card companies or associations and apply them to all of your card transactions, you will be in compliance with all of them.

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).

Just as with Visa and MasterCard transactions, merchants are required to obtain an authorization before completing any Discover card transaction. Discover authorizations are valid for 90 days and can be obtained electronically or over the telephone. Upon approval, Discover issues an authorization code, which must be written on the sales receipt, unless the authorization was obtained electronically. In a card-present environment, an electronic authorization request consists of the complete contents of the magnetic stripe on the card presented by the customer, read by the point-of-sale (POS) terminal. In card-not-present transactions, an authorization requests consists of the data, submitted by the merchant (in MO / TO transactions) or the cardholder (in e-commerce transactions).

If a merchant accepts a card payment without receiving an authorization, Discover is not required to pay for the sale. If a payment has already been received, Discover may charge back the transaction. As with Visa and MasterCard, an authorized Discover transaction can still be charged back for other reasons.

Discover authorization procedures:

• Electronic authorization procedures. If you use a POS terminal for accepting card payments, just follow the procedures given to you by your terminal provider for the use of that terminal. If your authorization request returns a “call center” referral code, call Discover’s Authorization Center at 1-800-347-1111 for further instructions (see below). This is also referred to a voice authorization. Additionally, you are required to contact the Authorization Center if your POS terminal is not working.
• Voice authorization procedures. Whenever you have to request a voice authorization, call Discover at 1-800-347-1111 and provide the following information:
  • Card account number (16 digits).
  • Your Merchant ID number (15 digits).
  • Card expiration date (4 digits – MM / YY).
  • The dollar amount of the transaction including tax and tip (dollars and cents).

If your request is approved, you will be given an authorization code, which you must write in the appropriate place on the sales receipt. If you received an authorization code by telephone, complete the transaction (force enter the sale). If a card is invalid, you will receive a message declining the transaction. You should never force transactions where authorization was declined and ask your customer for an alternative payment method instead.

Authorizing installment sales transactions. If you process installment payments, Discover requires that you receive a separate, current authorization for each installment before submitting it. You should do this anyway, as card account information (e.g. expiration date, card security code or even account number) can and does change over time.

Cancellation or change of authorization. If a previously authorized sale is canceled or its amount changes, you have to call Discover and request a cancellation of the authorization. An authorization can be canceled within 8 days of receiving it. You will have to provide the following information when canceling an authorization:

• Card account number (16 digits).
• Your Merchant ID number (15 digits).
• Card expiration date (4 digits).
• The dollar amount of the transaction including tax and tip (dollars and cents).
• Original authorization code given to you by your authorization provider for card transactions.
• The new sale’s amount, if different from the original one.

Authorization floor limit. Discover’s floor limit is zero, which means that you have to request authorizations for all card transactions. If you accept a sale without first obtaining an authorization, Discover may immediately charge it back to you.

Downtime authorization procedures. If Discover’s authorization system is unavailable, the floor limit for the duration of the system down-time is $150.00, but only for sales involving purchases of merchandise for which a cardholder takes immediate possession. For sales requiring delayed delivery, merchants should instead wait and obtain an authorization when the system is available.

Learn how to lower your card acceptance cost

Learn how to accept credit and debit cards at the lowest processing costs. The Payment Card Acceptance kit contains a video and an e-book:

• Video – Card Acceptance Best Practices for Lowest Processing Costs (18 min).
• E-Book – Payment Card Acceptance Guide (19 pages).

Visa uses chargeback Reason Code 70 to designate chargebacks resulting from processing transactions where two conditions are present:

• A card issuer receives a transaction that is below the merchant’s floor limit and
• The card account number is listed on Visa’s exception file.

MasterCard does not have an equivalent reason code.

Floor limit is the amount above which credit card transactions must be authorized before being processed. Floor limits are typically specified in merchant processing agreements. While merchants must request authorization for all transactions that are above their floor limit, they don’t have to do that for the ones below it. The floor limit is zero for all card-not-present transactions which means that they must always be authorized, regardless of the dollar amount. For example, if a brick-and-mortar store’s floor limit is $25.00, every purchase of $24.99 or less would not have to be authorized, while transactions of $25.00 or more would require authorization.

Visa defines its exception file as “A worldwide database of Visa lost / stolen cards and other accounts that issuing Members [Visa card issuers] have blocked and / or designated for special handling (e.g. pick-up, referral, automatic approval, etc. This service is part of Visa STIP [Visa's online authorization processing system that responds to merchants' requests for transaction authorization when issuers are unable to respond or when they have chosen to let VISA process certain transactions on their behalf]. All authorization requests routed to STIP are checked against the VISA Exception File.” The exception file is part of every payment processor’s transaction processing system and it should be automatically be checked when a card is swiped.

What causes these chargebacks? A chargeback Reason Code 70 is typically issued when a merchant has processed a transaction that falls below its floor limit and either did not check the exception file or received a negative response.

How to manage chargebacks with Reason Code 70? Your response will depend on the transaction details and on the actions you have taken already.

• The exception file was checked. If you did check the exception file, inform your payment processor who should be able to check its transaction log to verify your claim.
• The transaction authorization was declined or not verified. If you did process a transaction, for which the issuer declined authorization or could not verify, there is no remedy and you should accept the chargeback. Do not process a credit at this time, as the chargeback has already performed this function.

How to prevent chargeback Reason Code 70? The following best practices will help you minimize such chargebacks:

• Check the exception file. You should always check the exception file before completing transactions that are below your floor limit. Most POS terminals and payment gateways check the exception file automatically when the card is swiped. If the transaction is not approved, you will get a “Call Center” response and you should do a voice authorization.
• The card reader is down or the card’s magnetic stripe is damaged. In such cases you should make a voice authorization request. If your request is approved, write the approval code on the sales receipt and make an imprint of the card on the sales receipt as well.

If unsure, confirm with your processing bank that their transaction processing system automatically checks the exception file for all transactions that are below your floor 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).

Both Visa and MasterCard use special codes to designate chargebacks that result from declined authorization requests. Visa uses Reason Code 71 and its MasterCard equivalent is Reason Code 4808. Merchants should understand the reasons for this type of chargebacks and be prepared to handle them.

What causes these chargebacks? Chargeback reason codes 71 and 4808 are caused when merchants ignore a declined authorization response from the issuer and attempt one of the following actions:

• Forced posting. After an authorization request is declined, the merchant forces the transaction through, typically by key-entering it, without making another authorization request.
• Multiple authorization attempts. After an authorization request is declined, the merchant swipes the card over and over until the transaction is authorized. Such authorizations might occur if the card issuer’s authorization system times out or becomes unavailable for some reason.
• Split transaction. A merchant may try to circumvent the system by splitting the amount into multiple transactions when an authorization request for a certain amount is declined. Then the merchant will submit each transaction separately.
• Alternative authorization methods. Alternative authorization methods include key entering a swiped transaction for which authorization has been declined or making a voice authorization request and receiving an approval.

How to handle declined-authorization chargebacks? Processors have the capabilities to verify whether or not an authorization request was approved and, if that is the case, these types of chargebacks will be rejected as invalid and merchants will never see them. However, if you do receive a chargeback with a reason code 71 or 4808, follow these procedures:

• Transaction was authorized. If you have obtained an authorization approval code, contact your processor and provide the transaction date and amount.
• First authorization attempt declined. If your first authorization attempt was declined, there is no remedy and you should accept the chargeback. Be advised that multiple authorization attempts following the first one most likely will not be accepted as a proof that authorization was obtained.

How to prevent chargeback reason codes 71 and 4808? Merchants who follow standard authorization procedures will see few, if any, chargeback reason codes 71 or 4808. In particular, to avoid this type of chargebacks, you should:

• Always obtain authorization. You should always obtain authorization for transaction amounts that exceed your floor limit and never force them through if you receive a decline. Today authorization requests are sent out automatically by most POS terminals and payment gateways. Floor limits are typically specified in merchant processing agreements. For card-not-present transactions, the floor limit is always zero, which means that they must all be authorized.
• The terminal is down or the card’s magnetic stripe is damaged. If the card’s magnetic stripe cannot be read, either because of an issue with the terminal or with the card itself, you should call your processor’s call authorization center for a voice authorization. If an approval is obtained, write the approval code on the sales receipt and imprint the card’s information on the sales receipt as well.
• Never accept a declined transaction. If an authorization is declined, do not accept the transaction and ask your customer for an alternative payment method. Do not try to circumvent the authorization system as you will probably lose your chargeback re-presentment rights.

Train your staff. Your company’s sales staff should be adequately trained on your organization’s authorization policy. Most importantly, the point-of-sale staff needs to understand that, if an authorization is declined, they should not try to force the payment through, but ask for an alternative payment method instead.

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).