- SaaS Company
- Small Business
TABLE OF CONTENTS
Why You’re Reading This
You need to implement security policies and credit card authorization procedures. This will help you detect fraudulent transactions before they are processed, and will prevent you from spending significant time defending a disputed charge, not to mention it will save you substantial fees assessed for charge backs in addition to the money lost on the original transaction.
The following sections provide guidance on how to obtain the proper authorization for recurring ACH and credit card transactions
Recurring Credit Card Transaction Authorization
You are permitted to authorize recurring schedules that debit a credit card account by using a signed paper authorization form. The authorization requires that your customer understand the conditions under which the business is permitted to debit the account (such as amount, date, and frequency), as well as conditions for termination or change of the authorization.
- Payments for the same amount on a regular schedule, such as weekly or monthly service fees.
- Payments for a different amount on a regular schedule, such as utility bills.
- Payment plans for discharging a large debt, such as installment payments on a large purchase.
How to Authorize a Recurring Credit Card Transaction:
1. Have your customer sign and date the form (see templates) that includes the credit card account to be charged, how to terminate the schedule, and the information specified below for the type of recurring payment schedule
- Payments for the same amount on a regular schedule: Amount, frequency, and start date.
- Payments for a different (variable) amount on a regular schedule: Frequency, start date, not to exceed amount.
- Payment plans for discharging a large debt: Total due, # of payments, amount of payment, frequency, start date.
2. Give your customer a copy of the signed form.
3. Keep this form on file, stored digitally or in paper form, for one year after the last payment on the schedule.
4. Send a receipt for each transaction via mail or email.
Recurring ACH Transaction Authorization
Recurring Payments Will Make You and Your Customer’s Lives Easier:
- It’s convenient (saving time and postage)
- Payments are always on time (even if either party is out of town), eliminating reminder notices and late charges
Using a Recurring ACH Authorization Form is an Easy Way to Protect Your Business:
According to NACHA (the organization that oversees the Automated Clearing House (ACH) network) rules, there are only three reasons people can dispute ACH charges to their account:
- If it was never authorized by the account holder.
- If it was processed on a date earlier than authorized; or
- If it is for an amount different than authorized.
NOTE: The transaction must be for the exact amount authorized—it cannot be higher or lower. However, you are permitted to have customers authorize payments for variable amounts, and/or not to exceed amounts.
That’s it. And, disputing an ACH charge requires that the account holder provide notice to the bank in writing (or the electronic equivalent) that one of those three conditions exists. (Note that this is significantly different from credit card transactions where a customer can have a charge reversed simply by claiming that the product or service received was not what they expected.)
Set Up an Online Payment Form to Accept Payments Online
Go one step further and create a web payment page where you can automate your entire payment authorization process.
By hosting an online payment form you can:
- Display terms and conditions on your hosted payment form
- Display terms and conditions on your online invoice payment forms
- Automatically generate a transaction confirmation page and email a receipt