What Every Merchant Needs to Know About Splitting Credit Card Transactions

What Every Merchant Needs to Know About Splitting Credit Card Transactions


Many tricks have been devised to enable merchants accepting credit card payments get around one inconvenient industry rule or other. More often than not such tricks have backfired, rather quickly getting the offenders in trouble, but even so merchants have never lost their appetite for them. One of the most commonly used stratagems is the splitting of credit card sales amounts.

Splitting of Credit Card Transactions


A credit card sale is split when a merchant initiates two or more sales drafts for a single transaction, requesting multiple authorizations from the card issuer in the process. The reason for doing so is to avoid authorization limits outlined in the merchant agreement. By dividing the transaction amount among two or more sales drafts, the merchant ensures that each one falls under the authorization limit, thus solving the problem. This practice is explicitly forbidden and I would strongly recommend that you avoid it. There are simpler solutions to the authorization limit issue and I have suggested a couple of them below.

Split Tender Transactions


Firstly, not all split transactions are illegal. Merchants are allowed to process split tender transactions, even though these too involve two or more forms of payment for a single sale. There is a difference, though. Credit card companies typically allow holders of gift and prepaid cards to request split tender transactions, where the customer can use the card with another form of payment. The reason split tender transactions are allowed is that gift and prepaid card limits cannot be overdrawn. At the same time the cardholder must be allowed to spend the full balance of the card, preferably with as little inconvenience as possible. By contrast, credit and debit card accounts are much more flexible in that respect.

Why Are Split Transactions Prohibited?


There are no other exceptions to the rule and if you find yourself dealing often with high authorization amounts, you will have to look for a permanent solution to the issue. But first you need to understand why authorization limits are enforced in the first place.


Authorization limits play an important role in most processors’ fraud prevention strategies and are based on your average transaction amount. So if you average sale is $20, you will typically have no problem authorizing payment amounts of, say $30 or $40. However, if you try to authorize a transaction of $500, this would immediately, and understandably, raise a red flag. It just doesn’t fit your processing profile.


On the other hand, it would make a perfect sense for a criminal who has managed to take control over your merchant account to try and maximize his profits as quickly as possible, before the break-in is discovered.

How to Resolve the Issue?


The best solution to issues with authorization limits is to speak with your processor about it. Rather than trying to circumvent a perfectly sensible rule and placing the good standing of your merchant account at risk, explain your predicament to your processor. Chances are that your authorization limit was set too low and needs to be raised.


We have done it at UniBul Merchant Services on many occasions, most often for merchants with no previous credit card processing experience, who gave us an estimate of their average sale’s amount that was simply way too low.


There are merchants, however, whose sales amounts may range quite widely. In such cases we recommend that, when applying for a merchant account, rather than giving your processor an estimate of an average or median sale’s amount, you provide instead a figure that is closer to the highest end of your range than it is to the lowest.


In general, when you have a credit card processing issue, always try to first find a resolution with your processor before looking elsewhere.


Image credit: Boltinsurance.com.

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