isa changed the dispute process for chargebacks in 2017, due to the high volume of chargebacks they encounter. Visa’s overall goal is to resolve disputes before they happen, or at least soon after. Their chargeback resolution process consists of five steps, and it is intended to streamline the process, save time, and cut down on invalid disputes.

Pre-Dispute

The Pre-Dispute stage has two parts: Visa Merchant Purchase Inquiry and Associated Transactions. The Visa Merchant Purchase Inquiry is a program within Visa’s dispute platform, VROL (Visa Resolve Online). It consists of the following nine points:

The Associated Transactions part of the Pre-Dispute step is aimed to prevent the escalation of the chargeback if action has already been taken. For example, if a merchant has already credited a customer back for the disputed amount, then Visa will consider the dispute resolved.

Dispute Submission

The next step of the dispute process is Dispute Submission. The first part of Dispute Submission is Streamlined Processing: determining whether the chargeback is the result of Fraud and Authorization or Consumer and Processing Errors and acting accordingly.

Fraud & Authorization: Visa will determine whether or not a charge was fraudulent. Under certain conditions, acquirers and merchants can respond to the ruling. Those conditions are:

• Cardholder no longer wishes to dispute
• Compelling evidence
• Credit processed
• Invalid dispute

Consumer & Processing Errors: Issuer banks will be required to fill out an enhanced Dispute Questionnaire so that Visa can obtain all necessary information and move on to the next step, Dispute Response/Pre-Arbitration.

The second part of Dispute Submission is Dispute Rights Identification/Edits. Visa collects as much information about a disputed transaction as possible with the goal being to make the final decision themselves. However, if all information is collected and Visa still does not know how to decide, the dispute moves on to the next step.

Dispute Response/Pre-Arbitration

There is only one part to this step, called Response Certification. Issuing banks must read the responses that merchants have sent, and either support what the merchant is saying and accept liability for the amount of the chargeback or counter the response and let Visa decide. Failure to do so within 30 days will result in the issuing bank automatically accepting the liability.

Governance

There is only one part to this step, called Response Certification. Issuing banks must read the responses that merchants have sent, and either support what the merchant is saying and accept liability for the amount of the chargeback or counter the response and let Visa decide. Failure to do so within 30 days will result in the issuing bank automatically accepting the liability.

Rules

Please see our article on Visa’s Reason Codes.

Fraud Rules/Process:

Visa will apply new rules to the dispute process to target both card-present and card-not-present fraud:

American Express is a closed network and so their interchange rates work differently than Visa or MasterCard. For a long time, AmEx was the most expensive credit card to process, although the price has come down in recent years. However, they still have not shed this misconception. This article will attempt to break down AmEx’s system, which is difficult since AmEx does not provide a lot of information on the exact nature of these rates.

What is an Interchange Rate?

Before going into the specifics of American Express Interchange Rates, lets first settle on a definition of what an interchange rate is. An interchange rate is the rate a card network charges to cover the risk of doing business. All credit transactions involve risk because no physical currency is being exchanged, and an interchange rate is calculated to mitigate that risk incurred from fraud as much as possible. The cost of authorization and the average bank cost of funds are also factors in determining the interchange rate. These fees change twice per year and are paid whenever a merchant processes a transaction.

OptBlue

American Express is trying to shed its “expensive” reputation with its OptBlue program. This program offers what is referred to as a “wholesale” pricing agreement to smaller merchants (merchants processing less than $1 million annually). This is a highly personalized program and AmEx does not allow the exact numbers of their OptBlue pricing to be disclosed, although some payment processors list their American Express rates online with their markup. What we do know that AmEx separates transactions into pricing categories, and that certain variables such as the industry (restaurant, retail, ticketing etc.) affect that category. Other factors in determining pricing include whether the transaction is taking place online or over the phone (card-not-present) or in person (card-present) and the average ticket.

OptBlue Rates

Direct Processing

For merchants making over $1 million per year, American Express requires them to sign a direct agreement with the card network. There are two plans that AmEx offers for direct processing: the discount rate plan and a flat-fee plan. The discount rate is structured the same way as the OptBlue plan. AmEx does not provide information on how the flat-fee plan is calculated, however it is known that a merchant that chooses the flat-fee plan pays $7.95 on top of the monthly fee.

Other Fees

Some common fees that merchants may find on their bills include the gateway fee, CNP surcharge (for all keyed or manually entered transactions), Cross-border fee (for international transactions) and voice authorization fee (for when a merchant calls in an authorization).

Is AmEx Right For Your Business?

The last thing a merchant wants to do is lose a sale because they don’t accept AmEx. These days, while AmEx rates may be higher than Visa or MasterCard, it is more important to allow AmEx cardholders to make the purchases that they want to, thus generating more profit for you. After all, if your competitors are taking AmEx, why shouldn’t you?

Visa

U.S. Acquirer Pricing Modified for Account Verification and Authorization Reversal

Visa announced in a Visa Business News dated October 10, 2019, that modifications will be made to the U.S. Acquirer Authorization Verification Fees and extend the Network Acquirer Process Fee to include U.S.acquirer authorization reversals.

Effective July 1, 2020:

A new fee will be introduced to support the Domestic Debit Account Verification Fee.

• A new fee will be introduced to support the Domestic Debit Account Verification Fee.
• The rate and description of the existing Domestic Credit Account Verification Fee will change.
• A new Domestic Debit Authorization Reversal Fee will be created.
• A new Domestic Credit Authorization Reversal Fee will be created
• A new International Debit Authorization Reversal Fee will be created.
• A new International Credit Authorization Reversal Fee will be created

On March 26, 2020, the new card brand fees will be available in PPM. Description and rate changes will be implemented on April 1,2020.

Acquirer International Fees Modified for Card Not Present Transactions

Visa announced in a Visa Business News dated October 10,2019, that effective April 1, 2020, they will adjust the Acquirer International fees for CNP transactions in the Latin America and Caribbean region. Current acquirer international fee assessments will remain at existing rates for card present transactions and a new fee will be applied to CNP transactions.

International Acquirer Service Fee Rate Increase in Canada

Visa announced in a Visa Business News dated September 26,2019, that effective April 18, 2020, the International Acquirer Service Fee assessed for international transactions in Canada will increase by 20 basis points.

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Discover

Revised Acquirer Assessment Fee

Discover will revise the Acquirer Assessment Fee. TSYS Acquiring Solutions will support the rate changes in PPM.

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New Acquirer Fee for Program Integrity Fee

Discover is introducing a new Program Integrity Fee for all transactions submitted or downgraded to the Mid Submission Level and U.S. Base Submission Level programs for card sales.

American Express chargeback disputes work differently than Visa and Mastercard.

One of the main reasons American Express chargeback disputes differ is because American Express operates differently than other card networks. Unlike Visa and Mastercard, American Express has their own financial institutions that issue credit cards to consumers.

What Happens after a Customer Disputes a Transaction?

The American Express chargeback dispute process may look complicated at first glance. So we are going to breakdown the entire process step-by-step, so you will understand exactly how it works.

The process is initiated if an American Express cardmember contacts American Express to dispute a transaction. A customer might dispute a transaction for a number of reasons, including undelivered goods or services, dissatisfaction, or more.

American Express will review the customer’s dispute and act in one of THREE ways:

1. Dismiss the case
2. Issue an immediate chargeback to the customer
3. Send you (as the merchant) an enquiry

Most merchants won’t ever receive an enquiry unless American Express doesn’t have all of the information they need to settle the dispute.

In the event that you receive an enquiry, here are four ways to respond:

Four Ways to Respond if you have been Issued an Enquiry

Whether you have been issued a chargeback or an enquiry, you have 20 days to respond. Cardmembers aren’t subject to the same time restrictions. They are free to dispute a transaction at any time.

Within the 20 day period, here are four ways to respond if American Express gets in touch with you for a transaction dispute:

1. Authorize the chargeback
2. Issue a credit to the customer (or prove that you have already issued credit)
3. Issue partial credit
4. Provide sufficient evidence to validate the charge

Chargeback disputes can happen to any business, but you’re going to want to keep your chargeback levels to a minimum. Exceeding the chargeback threshold set by card associations could land you a spot on a chargeback monitoring program.

The best way to avoid chargeback disputes is to prevent chargebacks altogether. Here’s how…

How to Prevent American Express Chargebacks:

• Process credit immediately and let cardmembers know when they will receive a refund
• Share the return or exchange policy before completing the checkout process
• Ask for the Card Identification Number
• Use the Automated Address Verification Service
• Keep dissatisfied customers in the loop about the steps you are taking to resolve the dispute
• Obtain the customer’s signature for items picked up in store, work orders, etc
• Bill customers after products are shipped or service provided

Need Help with an American Express Dispute?

If your business has been subject to an American Express chargeback dispute, or if you have received an enquiry – you need to act fast.

Get in touch with us right away so we can help you successfully navigate a chargeback dispute with ease and confidence.

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Discover is one of the most popular credit cards in the U.S. today, alongside tried-and-true favorites like Visa, MasterCard and American Express.

It has gained popularity among younger consumers for its low introductory rates, no annual fees and rewards.

Despite its wild popularity, many businesses have chosen not to accept Discover cards because of Discover’s perceived “expensive” rates.

Is Discover really more expensive than card brands like Visa, Mastercard and American Express? Let’s find out…

What Fees Are You Required to Pay to Accept Discover Payments?

Every time a cardholder makes a payment with their Discover credit card, you pay what are known as interchange fees or card brand fees.

The interchange fees or rates are collected by Discover and are typically used to cover the following costs:

Credit and Debit Assessments

These fees can’t be avoided no matter which card issuer you choose. They are applied to gross credit and debit transaction volume and are paid directly to Discover.

International Processing Fee

If a customer makes a purchase using a card originating from outside the US, you will be subject to an international processing fee. You may or may not see the international fee on your statement depending on your pricing model.

Processing Integrity Fee

If a transaction doesn’t go through within a specific period of time, you may be subject to what’s called a processing integrity fee. Typically, the time window is 24 hours for “card present” transactions and 72 hours for “card not present” sales.

Card-Not-Present Surcharge

These are fees you might typically see in e-commerce or mail-order transactions when the card is not physically present. Because these are considered riskier transactions, the fee is slightly higher than “card present” transactions.

Account Status Inquiry Fee

This is a fee that is imposed when you verify cardholder information without actually charging the card.

While these fees may be collected by your processor, they are typically transferred in their entirety to Discover. You can think of these fees as the cost for accepting Discover credit cards in your store.

What Are The Current Interchange Rates for Discover?

Discover sets its interchange rates each year. They may go up or down or remain unchanged.

Here are the current U.S. Discover interchange rates:

* Please note that we have listed the most common interchange rate qualifications. Get in touch with Discover Card Network for a complete list of US interchange rates.

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Is Discover Right For Your Business?

Discover is quickly growing in popularity, especially among younger consumers.

Not sure if accepting Discover cards is right for your business?

Speak to one of our representatives to see how accepting Discover cards in your business may impact your bottom line.

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Mastercard has a special rate for card-not-present/e-commerce transactions. These are riskier transactions because of the risk of fraud, so they have a higher interchange rate. However, you can lower this rate by utilizing Mastercard’s SecureCode feature with the Universal Cardholder Authorization Field (UCAF). Mastercard SecureCode is called such because it requires the cardholder to enter a special code in order to make the purchase, thereby lowering the risk of credit card fraud.

As a result of lowering the risk of fraud, UCAF qualifies for a lower interchange rate than other card-not-present or e-commerce transactions. Further, there are two separate UCAF categories: “Full UCAF” and “Merchant UCAF.” Full UCAF interchange rates apply when both the merchant and the cardholder have SecureCode enabled, and Merchant UCAF interchange rates apply when only the merchant uses SecureCode.

As of April 12, 2019, the interchange rates for full UCAF consumer credit cards (dependent upon what type of card is used) are:

For merchant UCAF, the interchange rates are:

Debit and prepaid cards also have different rates for full UCAF and merchant UCAF. They are:‍

Compare the core credit card merchant UCAF rate to a core credit card key-entered transaction: the merchant UCAF rate is 1.68% + $0.10 while the key-entered transaction is 1.89% + $0.10!

At PayArc, we offer the option to set up your merchant account with MasterCard SecureCode. Not only will this reduce your risk of fraud, it can also save you money in credit card processing fees if you do a lot of card-not-present or ecommerce transactions. Call us today to find out more!

Level 3 credit card processing is a payment integration system that works with business-to-business transactions. It saves merchants in cost because in a B2B transaction, card networks have more information about both parties, which lessens the threat of fraud. The additional information that the card networks have includes what was purchased, where the purchase was made, and how much was spent, along with more than ten other data fields. Because of these extra “line item details,” card networks can offer much lower interchange rates for level 3 processing.

To qualify for level 3 processing, a merchant must accept certain payment methods issued by Visa or MasterCard. These methods include purchasing cards, corporate cards, or government spending accounts, and level 3 processing can only be used with these methods of payment. For example, even if you accept level 3 processing, that doesn’t mean that every transaction you process will have the level 3 interchange rate—just that when you process those specific payment methods, you will have the level 3 interchange rate.

Level 3 Interchange Rates

Visa has two categories for Level 3 processing fees: commercial and government spending account. They are as follows:

Mastercard has one category for Level 3 processing: Large Market Credit. The rate for this program as of 04/12/2019 is 1.90% + $0.10.

Card Eligibility

Not all cards are eligible for level 3 processing. Generally, business cards used by small businesses are not supported by level 3 processing, only corporate and purchasing cards belonging to governments or large businesses qualify. Since you can’t know just from looking at card whether it is eligible for level 3 processing or not it is more prudent to enter all of the information required for level 3 processing anyway, because while submitting irrelevant information can’t hurt you, not submitting potentially relevant information can hurt you in the form of not qualifying for the lower interchange rates.

Visa Requirements

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American Express Requirements

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Mastercard Requirements

hen a bank or credit card company contacts a merchant to inquire about a transaction, this action is called a retrieval request, or sometimes a “soft chargeback.” This can happen when the institution believes that a transaction may be fraudulent or if a customer does not recognize a transaction. Unlike a chargeback, this is just a request for information regarding the charge, the bank or credit card company is not currently disputing the charge.

Because a retrieval can be requested for up to 18 months since the date of sale, it is prudent to keep copies of your receipts through this period. You’ll want to contact the customer to explain the charge, and if they agree they’ll contact the bank to call off the impending chargeback. Similarly, you’ll want to contact the bank or credit card company requesting the information as well.

Once you receive a retrieval request, if you cannot contact the customer to explain the charge, it is advised that you proactively issue a refund before the bank decides to issue a chargeback. It is not advised that you wait to respond to retrieval requests, because failure to do so in a timely fashion can also result in a chargeback. From there, it is a separate process to dispute the chargeback, and this process can prove costly and time-consuming.

All businesses should be aware that their payment processor keeps track of all chargebacks in order to monitor fraud. Therefore, it is important to keep your chargeback ratio low to avoid looking suspicious. Too many chargebacks can result in your merchant account being terminated and in some scenarios your name or business can end up on MATCH.

Credit and debit card transactions have a processing fee associated with them that merchants must pay, this is referred to industry terms as credit card processing fees (for more information, click here). As a result, some businesses are reluctant to take credit and debit cards for small purchases. After all, these fees can add up quickly and when merchants see their processing statement at the end of the month, it can sometimes be quite shocking!

This is where cash discount comes in:designed to work for merchants who do lots of small-ticket transactions, cash discount is a program that allows merchants to pass the credit card processing fee to their customers by offering a discount for paying with cash or a check. This is different from a surcharge for credit and debit card users in that the“normal” price of the transaction is the price that credit and debit card users would pay, and customers that use cash or check would receive a discount. A surcharge would mean that the “normal” price of the transaction is what cash or check payments would cost, and those who pay with a debit or credit card would have to pay an extra processing fee.

The best example of Cash Discount is a Gas Station.  Gas Stations post two different prices, one for cash, and one for credit cards.  You can’t get any more straight forward than that.  Merchants using a Point of Sale (POS) software are able to increase prices to reflect the credit card processing fees, then at the time of check out, a discount for cash can apply.  Merchants using a menu would be forced to reprint or change posted menus.

Important: merchants must post the price for cards on the item, thereby making that price the “normal price.” If you post the price for cash and then charge the customer more for using a credit or debit card, that charge becomes a surcharge, which is prohibited by Visa and MasterCard rules, and also by law in several states: Colorado, Connecticut,Florida, Kansas, Maine, Massachusetts, and Oklahoma.

Is Cash Discount Right for Your Business?

That depends on what kind of business you run and how you run it. Do you process a lot of cash transactions vs. credit card transactions? Do you primarily deal with large tickets or small tickets?If you process lots of small-ticket credit card transactions, cash discount maybe right for you as those processing fees can quickly add up and affect your bottom line. However, you must also think that your customers won’t mind the new prices. If you have regular customers that strongly prefer their credit cards, they may choose to frequent somewhere else that does not do cash discount, which would mean that you lose out on the sale completely. Consider who your customers are and how this program will affect your business—if done correctly, you could save hundreds of dollars per year!

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ard brands started rolling out cards with EMV chips in late 2015 in the United States. These chips were developed by Europay, MasterCard, and Visa (EMV) to combat the fraud that was associated with magnetic stripe cards. You can read more about EMV Liability Shift here. With the switch to EMV from magstripe in 2015 came a practice is known as “EMV fallback.”

You’ve probably encountered EMV fallback just when going about your normal shopping—you’re getting groceries or new clothes, you go to insert your chip card into the terminal, and then the transactions fails, and the cashier asks to swipe the card instead. This process of trying to use the EMV chip and then having to use the magnetic stripe instead is known as “EMV fallback,” and it is declining in frequency. EMV fallback is undesirable because the purpose of EMV is to protect against fraud—if the chip doesn’t work and a customer has to use the magnetic stripe instead, the anti-fraud technology present in the chip is useless for that transaction.

Why Wouldn’t an EMV Transaction Work?

There are several reasons why an EMV transaction wouldn’t work. For example, sometimes the terminal or POS system isn’t programmed correctly to accept chip cards. Other times, the chip itself is damaged and the terminal cannot read the information. As previously stated, this isn’t ideal because magnetic stripe transactions are not automatically tokenized (see our article on tokenization here) like EMV chips are, and are therefore more susceptible to fraud. As customers, merchants, and their employees get more familiar with EMV, these fallback transactions are becoming rarer.

Fallback Fraud

In order to force a fallback, criminals can damage the chip on the card or the terminal itself. This means that it’s easier for a thief to use a cloned credit or debit card. While of course, not all fallbacks are fraud, and in fact, many legitimate customers may have to use the fallback mechanism, but it is recommended to monitor how often your business is processing fallback transactions. If you have too many fallback transactions, you may be subject to fees either from your credit card processor or from the card brands themselves.