MasterCard/Discover Partial Authorization FAQs

how does credit card authorization work

MasterCard and Discover are modifying their rules concerning the processing of debit, prepaid and gift cards. This FAQ includes important information about the new requirements and the timelines regarding Authorize.Net's support of the requirements, so please read it thoroughly.

UPDATE. MasterCard and Discover have relaxed the requirements for e-commerce merchants. Please review the updates below.

MasterCard and Discover have identified three main areas of concern that cause transactions to decline for customers using debit, prepaid and gift cards:

  1. Customers do not always know their available balance on their card.
  2. If a customer tries to spend more than the balance available on their card, the purchase is declined, with no option to use the card's available balance along with another form of payment.
  3. If a customer wants to use a debit, prepaid or gift card, and the merchant gets an authorization, but then the transaction is not completed, the available balance on the card is temporarily reduced unless the merchant reverses the authorization.

UPDATE. E-commerce merchants are now only required to provide support for authorization reversals. Though no longer required, partial authorizations and balance responses are considered best practices, and Authorize.Net still highly recommends that e-commerce merchants provide support for all three requirements. Retail and mobile merchants must still support all three requirements.

MasterCard and Discover are requiring that merchants support the following three transaction types for debit, prepaid and gift cards:

  1. Partial Approval (or Partial Authorization) — Merchants are required to partially approve a transaction if a cardholder does not have enough balance on their debit, prepaid or gift card. In addition, the merchant must allow cardholders to pay the remaining balance owed with another form of payment. This is called a split-tender purchase transaction.

Benefit. Prior to implementing partial approvals, a debit, prepaid or gift card with an insufficient balance would be declined. By supporting partial approvals, the merchant can turn a potential decline or negative cardholder experience into a completed sale by asking for an additional form(s) of payment to cover a purchase.

  • Authorization Reversal — Merchants are required to reverse an authorized transaction if a cardholder decides they do not want to proceed with the transaction and the transaction has not yet settled. Authorization reversals will free up the available balance on a customer's debit, prepaid or gift card when transactions are not completed.

    Benefit. By supporting authorization reversals, the merchant restores the cardholders' available balance, which enables them to potentially make a purchase (within their debit, prepaid or gift card's balance) at your store.

    This requirement is important when processing partial authorizations, because

    merchants will probably run into a scenario where a card is partially authorized for an amount, but the customer decides to cancel the transaction instead of completing the sale. If the authorization reversal wasn't required, the customer's available balance would be reduced until that authorization naturally expired.

  • Balance Response — Merchants are required to print the prepaid card balance on the customer receipt or display it on a customer-facing terminal/POS device/Web page, or both. Prepaid card balance information is made available by the prepaid issuer only for some, but not all, prepaid cards, and support of this requirement is limited to those particular cards.

    Benefit. By supporting balance responses and making the information available to the consumer, the consumer is better informed regarding their available balance on their prepaid cards, and could make additional purchases based on that balance.

    Additional Balance Response Questions

    • Will merchants be required to print the remaining prepaid account balance on both the receipt and display it on the customer-facing POS device or Web page?

    No. Merchants can choose to print the balance, or display the balance to the cardholder, or both.

  • Will the balance be displayed/printed for all debit and prepaid products?

    No. For security reasons, balances will only be returned by the issuer for prepaid cards (and even then, only for select cards) to avoid, for example, printing a customer's checking account balances. If the "available balance" is present in the record, merchants are required to print and/or display it to the customer, regardless of the dollar amount.

  • The compliance requirements apply to regular debit, prepaid and gift cards for the following payment card types:

    Though not mandated, Authorize.Net will also support the requirements for these additional payment card types:

    • Visa
    • American Express (Partial approvals & balance responses only; AMEX does not allow authorization reversals)

    MasterCard's rule changes go into effect May 1, 2010, and Discover's rule changes go into effect April 16, 2010. However, Authorize.Net, MasterCard and Discover have worked together to extend these dates for all merchants using Authorize.Net solutions. Our merchants will now have until June 30, 2011, to implement support for the requirements within their systems .

    As you will note, Authorize.Net will be ready to support the requirements long before our extended deadline of June 30, 2011. The additional time is being made available to you so that you have sufficient time, as applicable, to work with your shopping cart or solution provider, make technical changes to your Authorize.Net integration, update your internal systems and train your staff on these changes.

    Source: www.authorize.net

    Category: Credit

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