Card Brand Rules Every Merchant Should Know

As POS and credit card technology changes, so do the requirements from Visa, MasterCard, Discover, and American Express. Merchants rely on their merchant processor more than ever for information on how to remain compliant with bankcard regulations. Doing so can help the merchant avoid chargebacks and fees passed down from the four major card brands.

Minimum Purchase Amounts

Merchants are allowed to require a minimum amount in order to run a credit card, however there are a couple rules they should know:

  1. The required minimum amount for any credit card transaction cannot be more then $10

  2. Merchants cannot require a min amount on debit transactions.

  3. Requiring a min on debit can result into being reported to card brands.

    1. First offense – formal request that the practice is stopped

    2. Second offense- Results in a fine

    3. A third offense could result in the merchant being blacklisted from running future transactions.

Requesting Customer IDs

 Merchants can require a customer to see ID with a few guidelines they must follow:

  1. If the customer’s ID does not match the name on the card, the merchant can refuse to accept the card.

  2. If the customer does not have or is unwilling to present an ID, the merchant should honor the card if there is proof of card presence, a valid authorization, and a valid pin and signature.

Merchant MCC Codes

In order to avoid confusion and issues running credit card transactions, merchants should make sure they are classified under the correct MCC Code when signing up with their merchant processor.

  1. An MCC Code is a four digit code that categorizes the merchant’s business and dictates their interchange rate and the card types they are allowed to run.

  2. These codes are also used for activity tracking, reporting, and risk management

  3. Merchant should verify that they are classified correctly. If they fall under two different MCC Codes, they should use the MCC Code that has the highest volume or activate two merchant accounts.

Partial Authorizations

Partial Authorization Defined (TSYS): A partial authorization occurs when a payment card authorization is attempted for a transaction and there are not enough funds available in the account to cover the full amount. The issuer returns an authorization for the amount available in the account, leaving the merchant to obtain an additional form of payment from the customer for the balance.

 

The simple answer for all pre-authorizations is that all credit card machines and point-of-sale systems are required to take partial authorizations in order to be compliant. Card brand rules include:

  1. Discover requires that you take partial authorizations for all merchant category types

  2. Visa and MasterCard requires pre-authorizations for only certain  MCC Codes 5812 (eating places and restaurants) and 5814 (fast food restaurants)

  3. Card brands do not allow there to be machines that can disable partial authorizations.

  4. If the sale is greater than the partial authorization (for example: if the partial auth is $5 and the merchant adds a tip resulting in a transaction amount greater than the available funds), the transaction can be disputed by the cardholder for incorrect charge since the partial authorization is only $5.

 

Additional References:
Visa Rules and Regulations
MasterCard Rules and Regulations

Industry News, GeneralRobert Copeland