Visa’s Misuse of Authorization Fee

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As of October 1st 2009 Visa has started to charge a fee of $.045 per misused authorization.

Visa defines a misused authorization as:

Authorizations that are not followed by a matching clearing transaction (or in the case of a cancelled or timed out authorization, not properly reversed)

For MOTO and e-commerce merchants who use payment gateways there may be some changes to how they perform Auth and Capture type of transactions, especially if they Authorize the transaction at order time, and later Capture or Complete the transaction when they ship a product. Or more typically, perform a $1.00 authorization first with AVS and CVV2 data, and followed by an authorization for the total amount of purchase.

Many payment gateways may or may have authorization reversals, authorization voids, or other transaction types – you will need to work with your gateway to identify what transaction types need to be performed to “reverse” an authorization for a product that you do not ship. Or if your practice is to re-auth after 10 days, and let the original expire – you will be hit with the fee.

Visa also supports a new transaction type called Account Verification – which is a $0.00 authorization – which they hope merchants will used instead of misused authorizations.

For processors and large merchants with direct connections to Visanet or Payment Gateways – These entities will want to verify that their reversal processing addresses credit reversals in the time-out scenario.

1 Comments

  1. Visa basically have two main regulation changes [1] eliminate the misuse fees ($1 authorization) and replace with $0 authorization [2] other major thing is that we will have clear and reverse the authorization if we know that we cannot fulfilled an order within 72 hours.

    Do you know if we implement the $0 authorization, do we still have to clear and reverse the authorization if we cannot fulfilled the order?

    PayPal Developer Community Post:
    “Recommended Best Practice: To minimize the fees charged, it is suggested that all merchant modify their code to being using $0 authorizations (ZDA) to verify a card.“

    “Recommended Best Practice: To avoid triggering the above fee, you must either perform a delay capture within 10 calendar days of the original authorization request or, in the case of a cancelled order, void the authorization within 72 hours of the original authorization request.”

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