When do you post customers credit card transactions

When it ships or when it is ordered?

[lgn1]

In the past we have done an authoriziation only (hold funds) like the car rental agency, when the customer places a credit card order.

We would then post the transaction, when the item actually ships.

Sometimes, things are on backorder a few weeks, and the hold expires, or the card expires, or the foreign conversion rate becomes volative, and the customer is actually charged a different amount than the day they placed the order. Add items being drop ship occasionally and you add real confusion.

Because of these complications, we have decided to post credit card transactions on receipt of the order, as we have 96% fullfillment of orders within 5 days.

Our bank says that billing on reciept of the order is OK because the customer has made a commitment when they placed the order.

Because of these issues, we have changed the policy and charge the credit card when the order is placed.

Im just wondering what industry practice is. Im sure their will be some paranoid people out there that will check their credit card statement on a daily basis, rather than waiting for their monthly statement to arrive, and will complain that they were billed a week before the item shipped.

I just wondering how other businesses are handling this?

[curlykarl]

Hi

We charge first, a lot of the items we sell are only available by special order, so we need to know the customer is good for the money before we go to the trouble of ordering an item in.

Karl :)

[stevenmusumeche]

We do almost entirely drop ship. We only authorize at the time of order, then capture the funds 3 days later. We have found that most drop ship orders will have shipped within this time period.

If you charge the credit card immediately and the item doesn't ship, many customers will be very upset. I was surprised at how much of an issue this really is. I believe it is also against the card companies' regulations to charge a credit card before an item has shipped.

[lgn1]

I checked my card holders agreement, and I find no reference about charging before shipping.

On some orders we were charging for the items shipped, and then charge for the back order, when the back order ships.

I have a lot of customers who are confused by this, and we were getting a lot of phone calls from the customers, thinking that we were double billing.

Ever since we changed over to billing everything up front, we have gotten a lot less paperwork, and alot less customer inquiries, about credit card transactions.

The way I figure it, if you can fullfill the order in a week, go ahead and bill upfront.

Im sure I will find some nut who will cross reference the transaction date, with the shipping date on the waybill, and demand their 17 cents interest charges credited, but these will be far between.

[martyt]

We capture on shipment, except for "special order" items which clearly state that the card will be charged immediately. We also occasionally have items on backorder and ship a partial order; in that case, we still capture the full amount of the order and send the backorder when it comes available.

[mahlon]

I usually capture before or after item ships, just depends on what the day is like. Even for backorders or so's. We'll even capture for a different widget that gets send out for exchange and then credit when we receive other item.

[WebStart]

There is a lot of misunderstanding about whether or not a merchant can capture (charge) a sale before it ships. I have had some customers who are upset about it, but not many. I have some who claim it is against the law. Here are the facts:

The law is an Federal Trade Commission (FTC) rule, and it is rather lenient in favor of the merchant. It is not wrong nor illegal to capture or charge a sale before it ships.

Banks may have their own rules about when their sponsored cards can be charged. I am not sure about that. But not every bank may have the same rule, But when I have called various banks on this subject I find them to be quite lenient also, but most with whom I speak seem to be very vague and uncertain about what "their rule" is, and what the "law" is.

In case you ever need it here is the website with the FTC rule, and some quotes from it:

[ftc.gov...]

Authority: 15 U.S.C. 57a; 5 U.S.C. 552.
PART 435 -- Federal Trade Commission: MAIL OR TELEPHONE ORDER MERCHANDISE RULE

The Rule requires that when you advertise merchandise, you must have a reasonable basis for stating or implying that you can ship within a certain time. If you make no shipment statement, you must have a reasonable basis for believing that you can ship within 30 days. That is why direct marketers sometimes call this the "30-day Rule."

If, after taking the customer’s order, you learn that you cannot ship within the time you stated or within 30 days, you must seek the customer’s consent to the delayed shipment. If you cannot obtain the customer’s consent to the delay ... you must, without being asked, promptly refund all the money the customer paid you for the unshipped merchandise.

The evidence you need to demonstrate the reasonableness of your shipment representations varies with circumstances. .... .... The "clock" on your obligation to ship or take other action under the Rule begins as soon as you receive a "properly completed" order.

An order is properly completed when you receive the correct full or partial (in whatever form you accept) payment, accompanied by all the information you need to fill the order.

[rogerd]

On sites that tend to fill 100% of their orders in a timely manner, I like billing at time of order placement. On sites that have high backorder rates, occasional lengthy delays, and moderately frequent cancellations, I like billing at time of shipment. (The downside is that you might stuck with product if the card is declined.)

If you bill with the initial order, I'd say it's very important to either fill the order promptly or keep the customer very well informed. I've always associated using a "bill first" approach (without immediate shipment) with shady merchants who at best were undercapitalized and at worst were attempting to rip me and/or the bank off.

If I got my credit card statement and there was a charge for an item that hadn't shipped to me, I'd charge back the merchant first and ask questions later.

[lgn1]

Webstart, thanks for the information. This clarifies the issue.

RogerD 'The charge back first and ask questions latter', is the type of attitude that we are trying to
eradicate.

Most Credit Card companies, prefer that you to try to resolve a dispute with the merchant first. If you can't get immediate resolution with the merchant, then yes then phone the credit card company to ask for a charge back.

We put high priority on making the disastified customer happy, and we do what we can, without selling the farm. We get very frustrated when we get a charge back request (other than stolen card fraud), and the customer never even contacted us.

[rogerd]

I've been a DM seller for years, lgn1, so I understand your preference for working things out with the merchant first. And indeed, for any normal issue (product not as advertised, shipping damage, etc.) that's exactly what I'd do. I know how frustrating chargebacks are, and I've found that I can just about always work things out directly with the merchant. (Just the threat of a chargeback is often sufficient to get action on a problem.)

However, if I was charged immediately and, say, a week or two had passed with no shipment, my confidence in the merchant would be gone. I'd assume (rightly or wrongly) that the seller was floating his business on his customers' money and that any other information he provided (product shipped yesterday, product will be in stock on Monday, etc.) would be more BS to stall me off. Hence, my inclination to charge back.

I'm not saying that every customer will do this, or should do this. It's just important to realize that some people react negatively to being charged well in advance of shipment.