Confusion involving Credit/Debit Cards and Security Features.

Confusion involving Credit/Debit Cards and Security Features.

Due to recent changes in the financial markets, new financial products, and overall changes in the banking industry, there seems to be a lot of confusion about the differences between Debit Cards and Credit Cards, and the fees associated with certain kinds of transactions.

The Banks, Credit Unions, and other financial institutions are not always helpful in this regard, since the confusion actually benefits them.
 

Here is some helpful information on this topic:

Types of Cards – The most common examples are.

  • Standard Credit Card – (American Express, MasterCard, Visa, Discover, JCB, Diners Club, Carte Blanche)  – Credit Cards can be used for both Sales and Return transactions.

  • Purchasing Cards – This is like a standard Standard Credit Card, except that they are usually issued to employees of a  company or government agency. They may have spending limitations such a limited transaction size and/or  requiring that a PO number be provided with each transaction.  As a merchant, if one of these cards is accepted and no PO number is provided to the processor at time of authorization, the fee charged to the merchant will normally be at the  highest rate in your merchant contract..

  • Standard Debit Card – This type of Debit Card can ONLY be used as a Debit Card, not as a Credit Card. Your credit limit is the balance of your account, or whatever limits are set by your financial institution.  Generally, these cards are identified by the lack of a MasterCard or Visa logo.  These type of cards require that a Pin Number be specified  at Point of Sale in order for the transaction to complete and to settle at end of day..  Care needs to be taken so that these  types of cards are not used by your staff as Credit Cards.  An example of this is the MaestroCard.  It looks a little like a MasterCard, and is owned by MasterCard, however there is no MasterCard Logo. The  card colors are Red and Blue on a White background.  MaestroCards are promoted heavily in Europe, Africa, and Latin America.

  • .ATM Card – Most people are not aware of the fact that as standard Bank ATM card can be used as a Debit Card, but in doing so,the user has to supply the pin number.  Trying to use this type of card as a Credit Card will result in an "Invalid Card Type" message.

  • Logo’d Debit Card (Check Card) – This type generally has a Visa or MasterCard Logo on it.  It can be used as both a  Credit Card or as a Debit Card..  However, when used as a Credit Card, the fees that the merchant pays are generally higher than when used as a Debit Card.

  • Pre-Paid Logo’d Gift Cards – These are pre-paid Gift Cards with MasterCard, Visa, or American Express Logo. They can generally be used like a normal Credit Card.  However, in most cases the user must know the exact balance remaining on the card if the want to use it all. This may involve having to dial a phone number or go to a web-site to check the card balance.

Note:  Standard Debit Cards, ATM Cards, Pre-Paid/Logo’d Debit Cards cannot be used for POS Returns.
 

  • Stored Value Cards – (Store Specific cards that have no specific value upfront).  This card type must be pre-loaded at point of sale  before it can be used. The current value/balance of the card is kept off site at the service providers web-site.   Fees may be involved in with every type of transaction done on the card, including balance checks. Typically, this type of card can only be used at a specific merchant.  An example of this is a Starbucks Card.

Types of Merchant Accounts:

  • eCommerce – Internet Sales

  • MOTO – Mail Order/Telephone – Assumes that the card is not present, and will require that the CID number on the back of the card be provided in order to get an authorization. This method of processing always garners the highest fee rate from your processor. 

  • Retail – Retail Merchant – Assumes that the card is always present.  Gives best fee rate.

Types of Verification Services:

AVS (Address Verification Service)  –   With AVS, a service of credit card issuers and processors that validates the billing address given by a card customer when placing a telephone or Internet order.  Subsequently authorizes a charge. Catalogers use AVS to identify fraudulent orders. The address match is based on ZIP code.

The AVS system is not foolproof and will, for example, authorize charges when the bill to address given by the customer is correct and the ship-to address is fraudulent.If this is turned on and no AVS or CCV information is provided, the bank will normally charge you the highest fee rate that your merchant agreement allows.In CounterPoint, the software pulls the AVS information form the customer master record for the selected customer.  The software can be set to require an AVS match in order for the transaction to go through, and allow certain users to to AVS overrides when the addresses don’t match.

C V V 2 / C V C 2 – (Card Verification Value Code/Card verification value) – CVV2/CVC2 is a new authentication procedure established by credit card companies  to further efforts to reduce fraud for Internet transactions. It consists of requiring a card holder to enter the CVV2/CVC2 number at transaction time to verify that the card is on hand.  The CVV2/CVC2 code is a security feature for "card not present" transactions (e.g., Internet transactions). This now appears on most (but not all) major credit and debit cards. This new feature is a three or four-digit code which provides a cryptographic check of the information that is embossed on the card.  This means that the  the CVV2/CVC2 code is not part of the card number itself. The CVV2/CVC2 code helps determine that the customer placing the order actually possesses the physical credit/debit card and that the card account is legitimate.

Each credit card company has its own name for the CVV2/CVC2 code, but it functions the same for all major card types. (VISA refers to this as CVV2,  MasterCard calls it CVC2, and American Express calls it CID.)  The back panel of most Visa/MasterCard cards contain the full 16-digit account number , followed by the CVV2/CVC2 code. Some banks may only show the last four digits of the account number followed by the code. For Visa/Mastercard, the three-digit CVV2/CVC2 number is printed on the signature panel on the back of the card immediately after the card’s account number.  For American Express, the four-digit CID number is printed on  the front of the card above the card account number.

In CounterPoint V 7 and CP SQL this feature is only available if you are using the "MOTO" and eCommerce options listed above.

Most fees with Credit Card processors are negotiable, but you really need to read the fine print.  You should also review your software security settings in order to make sure  that you are taking advantage of everything that your software has to offer in this regard.

If you have more question about any of the features mentioned above, please contact the CCS Retail Systems Support Department.

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