It's important to understand authorization, because without it, you won't be able to accept your customer's credit card for payment — and that could mean lost sales.
Authorization is the process of confirming whether your customer's credit card has sufficient credit to purchase goods or services from you, and also confirms whether the card is valid. You can obtain authorizations through a credit card machine
, ecommerce web site or over the phone.
Authorization follows these steps. Generally, this entire process occurs within a matter of seconds:
- Your customer presents his or her credit card information to you in order to make a purchase. This can happen in person, over the phone or your customer may enter this information into your ecommerce site.
- Next, you transmit this information to Chase Paymentech (for instance, in a card-present environment, you swipe the card and enter the dollar amount, then send this information to us).
- Chase forwards your request to the card payment brand such as Visa® or MasterCard®.
- From there, the payment brand sends your request to the card issuer (the card issuer is the bank that issued the card to the customer).
- The issuer will approve or decline the transaction, and this response is sent to the payment brand.
- The payment brand sends the response to Chase.
- Chase forwards the response to you (either via your point-of-sale device, ecommerce web site or we can provide it to you verbally over the phone), so you can complete the transaction.
- The card will either be approved and you will receive an authorization number, or it will be declined or referred. See below for an explanation of approvals, declines and referrals.
Some merchants, particularly those with very large daily sales volumes, can send multiple authorization requests grouped in a batch once to several times daily, or over the phone.
Approvals, Declines and Referrals
An approval means that the dollar amount you specified will be reserved from the cardholder's available credit limit for future settlement.
A decline means that the customer's card cannot be used to complete the purchase.
As a merchant, when it comes to payment processing, what matters to you is whether or not your customer is able to use his or her card. Because it is not your responsibility to explain to your customer why his or her card was declined, this information is not transmitted to you. If a customer wants to know the reason for the denial, he or she should use the customer service contact information on the back of the credit card to get more information.
Be aware that you may receive a declined response for a number of reasons — for instance, it may be because of a temporary situation such as a customer going over his or her credit limit, or another issue, such as when a card is lost or stolen.
A referral is a request for additional information (either from the merchant or the cardholder) before an authorization can be issued.
An issuer may send us a referral response as a security measure. If we receive one, we will contact the issuer directly and request an authorization on your behalf. At this point, the issuer may request to speak with you or your customer/cardholder over the phone to confirm the legitimacy of the transaction before issuing the authorization. A typical example of when this occurs is if the cardholder is trying to make a purchase in a foreign country, is using his or her card more than usual in a short amount of time, or has reached the credit limit.