- Credit card authorization is when a merchant sends a request to their acquirer, who then sends the request to the card issuer to verify that a customer's account can cover the transaction costs.
- Credit card authorization can fail for various reasons, such as technical or financial issues or a customer needing to add additional products or services to a recurring bill.
- Every payment provider will use a different approach to reauthorizing credit cards, but an example can be helpful to see how the process works.
How Does Credit Card Authorization Work?
When a customer makes a purchase with a credit or debit card, the merchant must verify whether the transaction is approved or denied before completing a transaction. Credit card authorization occurs when a merchant sends a request to their acquirer or credit card processor like PayPal submits a request to a card issuer. The card issuer reviews the customers' accounts and sends an approval response code to the acquirer. The acquirer then sends the code to the merchant, notifying them whether a customer has sufficient funds or credit to cover the cost of a transaction. If the authorization results in an error code, the transaction is unauthorized.
How Cards Get Unauthorized
Credit card authorizations can fail for various reasons, such as technical or financial issues. Since the credit card life cycle takes seconds to complete, customers will soon find out when their cards are unauthorized. The error code will indicate the authorization failure type, which varies based on the credit card processor. No matter the reason, it's important to note that failed authorization attempts mean a transaction cannot be processed. Merchants should never complete transactions without receiving an authorization code first.
For technical error codes, sellers are typically responsible for solving these issues, such as a checkout page not loading. However, it could also result from an acquirer having technical problems, which means the merchant has to wait until the payment platform is working again to provide a timely, accurate response code. Generally, the problem is related to incorrect payment information being sent to the payment processor. For example, it could be a configuration or online submission issue in which a customer accidentally entered the wrong CVV code or forgot to type in their billing zip code. It's the merchants' job to quickly address and fix these problems as soon as possible to avoid the customers becoming frustrated and taking their business elsewhere.
For financial error codes, this usually means there is an issue with a customer's account, such as a lack of appropriate funds or credit needed to purchase a product or service. Further, these error codes can also be caused by cardholders reporting that their card has been lost or stolen, indicating that it may be a fraudulent transaction.
How to Reauthorize a Credit Card
If a customer's transaction fails, merchants can reauthorize the same card within 12 hours of the first attempt. This card reauthorization would be eligible for a declined authorization chargeback. It's important to note that every payment platform will use a different approach to how merchants can reauthorize customers' credit cards on file. However, it's helpful to view an example of how this process works. Look at how the American Booksellers Association handles credit card reauthorizations made via IndieCommerce websites.
Credit Card Reauthorization Example
Navigate to the merchant's Store page and select Orders and View Orders.
1. Click the "View" button for the order.
2. Select the "Reauthorize CC" button in the "Payment" section.
3. This will take you to the "Credit Card Terminal" page. It's essential that the "Charge Amount" is correct.
4. Select the correct card if a customer has more than one credit card on file.
a. Select the "Charge amount to this profile," which should trigger the page to refresh and display "Payment Received" in the "Order Status" section at the bottom of the page. You should also see a new admin comment, which can be updated to "complete" once the order is shipped.
b. If you aren't ready to charge the card on file but need to reauthorize the card, select "Authorize amount only on this profile." The page will refresh and display "Pending" in the "Order Status" section. Once the order is ready to ship, you can update the order status. New authorizations are only valid for a maximum of 4 weeks.
5. Void the original authorization.
a. In the "Payment" section, select the "Reauthorize CC" button.
b. In the "Prior Authorizations" box, select the authorization no longer needed and click "Void Authorization."
A few things to remember are that merchants can only reauthorize cards stored on a customer's profile that has not expired or been reported as lost or stolen. If one of these scenarios applies, companies must manually reach out to the customers to obtain the new card information. Customers can update their card information online, over the phone, or in person at the business.
Credit Card Authorization Form Template
A credit card authorization form is a formal document that customers sign to approve a credit card transaction. Businesses use these forms to validate card transactions and keep a record to prove that customers authorized the charges. This form indicates that a cardholder agrees to the merchant's charges, often used for recurring payments and card-not-present (CNP) transactions. Indeed, these forms can help combat the ongoing issues of credit card fraud and chargebacks.
While this form template can vary, there are mandatory and optional items to include, as shown below.
Mandatory Credit Card Authorization Information:
- Card number
- Card type (e.g., American Express, Discover, or Mastercard)
- Cardholder name
- Cardholder billing zip code
- Cardholder signature and date
- Expiration date
- Merchant name
- A statement authorizing the charge
Optional Credit Card Authorization Information:
- Additional terms and conditions
- Cardholder's billing address
- Cardholder's phone number
- Customer ID number
- Date of purchase
- Invoice order number
- Merchant logo
- Merchant phone number
- Purchase details (e.g., amount or type)
Want to Optimize Your Payment Flow?
If you need to reauthorize a credit card, it can be difficult and time-consuming to reach out to each customer with an expired, lost, or stolen credit card. What can businesses do to save time, energy, and resources on this repetitive yet critical task? We are glad you asked!
At TokenEx, we offer a wide range of products designed to help optimize your payment ecosystem, such as Account Updater. The TokenEx Account Updater automatically updates credit card data on file in your payment vault when it is lost, stolen, expired, or upgraded. Specifically, clients send us a batch file containing their customers' credit card data and associated tokens. Once this information is received, we work with the credit card brands to automatically update outdated card data in their payment systems and our clients' payment environments.
Indeed, this payment automation can benefit your business and customers because neither party will need to manually update stored card information every time a card authorization is declined. As a result, technology like Account Updater can help you create a seamless, user-friendly checkout experience for customers that will be more likely to stay with your business.
Want to learn how to optimize your payment flow?