Using My Credit Card Gateway

[ecommerceprofit]

I signed up for real time authorization with my credit card gateway. Quick question. I know I can authorize and then capture later. Why would I want to do this? Why don't I just authorize and capture at the same time and just refund customers if I do not have enough in inventory? We have tons of items and real time inventory is impossible.

[LifeinAsia]

Becuase you'll usually get hit with processing charges on both sides of the equation (charging and refunding). Even assuming just a 2% rate, you just wasted $4 because you couldn't fulfill a $100 order. And that didn't even include per transaction fees. So it's probably closer to $4.50 you just wasted.

Another scenario: You charge someone on the last day of their billing cycle, so it appears on the next credit card statement he recieves. Oops, can't fulfil the order, so you issue a refund the next day (but that refund won't show up until the customer's staement the next month). The customer gets his bill and sees the charge, but you told him you're not sending the product. He complains to his credit card company, which issues you a chargeback. So now you're out an additional $10-20 plus the $4.50. Plus you have a chargeback on your record. Too many of those and you're processing rates go up (or you get dropped completely).

[Corey Bryant]

Technically, you are not supposed to charge the consumer until the merchandise has been shipped. Do merchants do this though? Yes - all the time.

Doing a post-authorization - you are only charged a transaction fee. If you you do a sale and then refund, you will be charged transaction fees, and discount rates. This can get pretty expensive.

Plus what happens if you have a large sale and then potentially have to refund it and no money in the bank? This could cause a red flag.

Also keep in mind that pre-authorizations usually only last a couple of days (depending on the issuing bank). And even though the pre-authorization has expired, you can still potentially do a post-authorization / sales via the virtual terminal.

-Corey

[ecommerceprofit]

Thank you so much for taking the time in giving me detailed answers - very nice of you - helps me a lot with getting setup :-)

[ecommerceprofit]

Well I just discovered that they let me do a file transfer all at once in a batch. The reason I find this appealing is because they only give companies 48 hours to capture a transaction after the authorization has taken place before higher fees kick in. Well, sometimes it can take 5 days before we can fill an order. Sometimes immediately but sometimes items are hard to find. Visa allows 7 days and Mastercard 30 days (between auth and capture) but that does not matter - in 48 hours they charge higher exchange rates by Mastercard/Visa. So my plan is to upload tansactions as a batch - that way I don't have to worry aboutthe time between auth and capture - I just capture. Am I correct in what I say?

[Peter Cornstalk]

If you classify products as special order/custom order/built to order, you can capture the card before it is shipped. You just have to make sure you have it in your Terms of Sale.

Otherwise if you capture before shipping, the credit card companies list this as a reason for a charge back.

[edited by: Peter_Cornstalk at 8:00 am (utc) on Dec. 16, 2006]

[Corey Bryant]

Pre-authorizations usually only last a couple of days (depending on the issuing bank). And it depends if it is a credit card or debit card with a Visa / MasterCard logo. There is not one specific answer for you saying: Visa allows three days.

The card associations (while they matter) it is up to the issuing bank. Most debit pre-auths will be shorter than a credit pre-auth.

And if the pre-auth has expired, you can go into your virtual terminal usually and finalize the sale. You can run the risk of being denied (if the customer has gone over his / her limit). The sale is not gauranteed like it is with the pre-auth. Of course, if the sale finalizes - the money is yours.

Depending on what the consumer tells the issuing bank will determine the chargeback. A lot of times, it could be time. If you told them it would be there at a certain time and it was not, consumers (depending on the issuing bank) will have grounds for a chargeback

-Corey

[sniffer]

I know I can authorize and then capture late

I cant tell from the thread if you're still thinking of doing it this way, but i'd advise against it. Some customers get very irate when they learn they have paid for something up front and then have to wait for a back order. I think this is fair enough too. It means they cant look for a store where they could have received the item faster.