Once the issuing bank’s system has made its determination, it will send an authorization code back to the merchant. The bank check to make sure the account has sufficient funds, the card hasn't been reported lost or stolen, and there are no other flags on the account. The issuing bank's system will look up the card and verify that it can process the transaction. When a customer presents their payment card to make a transaction, the terminal reads the card and sends the relevant information to the customer's issuing bank. When a transaction is declined, the specific code provides information about the reason for the decline. These insights can be used to identify various errors and inefficiencies that-if left unchecked-can lead to mistakes, confusion, and chargebacks.Ī credit card authorization code is a two- to six-digit alphanumeric code that indicates whether a transaction has been approved or declined. What do merchants need to know about the various authorization codes they might receive, how they can be used to prevent chargebacks, and how responding to them improperly can lead to chargebacks?īy familiarizing themselves with the basic function of authorization codes and shedding any misconceptions they might have about what they can and cannot do, merchants can gain a better understanding of how the authorization process works. While customers only see authorization as being approved or declined, there are actually a variety of more specific codes that the merchant can see, giving them more information about why the card was declined and what should be done. This is the part of the process that occasionally makes itself visible to the customer in the form of the dreaded "card declined" message. The first and most important step in this behind the scenes process is authorization. Behind the scenes, however, there's a lot going to make that transaction work. From the typical customer's perspective, you simply insert your card, press a button or two, and wait for the beep.
Most people don't spend much time thinking about how a credit card transaction actually works. How Do Credit Card Authorization Codes Affect Chargebacks?.Are There Ambiguous Credit Card Authorization Codes?.
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