Visa Charging Chargebacks
NEW YORK -- A new Visa chargeback policy will go into effect this week that might provide some relief for retailers being forced to pay for chargebacks on entire purchases, Convenience Store News reported.
On April 14, banks will be held responsible for any purchase amount over $50, rather than the whole amount of the purchase, according to Visa spokeswoman Rhonda Bentz, who noted the change was a response to gas merchants' concerns over rising prices, in an interview with the Arkansas Democrat-Gazette.
Retailers' current solutions to prevent large amounts of loss when forced to pay for chargebacks included shutting off the pumps once the purchase amount reached the credit cards' limit -- $50 with Visa and $75 for MasterCard.
"It creates a situation where a retailer has to make ... a choice between two equally unappealing choices: Either restrict the customer's ability to fill up and shut off the pumps at a certain limit, or allow the pumps to continue to fuel, but risk not getting paid for the transaction," Jeff Lenard, spokesman for the National Association of Convenience Stores, told the paper.
However, the company set up the system to prevent fraud.
"It's to protect both merchants and cardholders, because as the transaction amount goes up, so does fraud," Bentz told the paper. "So we're focused on reducing fraud within the system, as well as defending merchants and cardholders from becoming victims of fraud. That's where we fit into all of this."
When a customer uses a Visa credit card at gas pumps, a computer ensures that there is at least $1 available for credit. By setting the spending limit, a fraudulent transaction, or if the customer exceeds the credit limit, the result is no more than $50.
According to Visa, 95 percent of the card company's gas transactions are under $50, with the average purchase at $29. In addition, only a small section of the remaining 5 percent actually end up as chargebacks.
However, there are some ways to circumvent the protections. If the pump shuts off, customers can go inside the store and ask employees to authorize another transaction on the card and resume pumping gas. There are no pump limits for transactions that begin inside the store, the report said.
Not all gas retailers follow the limits. San Ramon, Calif.-based Chevron Corp. allows customers at the pumps to exceed Visa and MasterCard credit card limits, according to Casey Callaway, a spokesman for the company. Chevron suffers the losses but adheres to Wright Express, Voyager, Discover, and American Express pump-limit guidelines, Callaway told the paper via e-mail.
The company exceeds Visa and Mastercard limits "in order to satisfy customer requirements and meet market conditions," Callaway said, adding that chargebacks from Visa occur daily, and each time Visa withholds all of the funds involved in the transaction.
The dispute is between the issuer and the bank, according to Joanne Trout, spokesman for MasterCard. "The cardholder and the merchant are only indirectly involved," she told the Democrat-Gazette. "It is up to the [bank] if they want to pass the liability down to the merchant."
That puts stores in a lose-lose situation, said Lenard.
"If you stop the pumps, it gives [customers] one more reason to come inside and scream at you, and that's certainly the last thing you want to see when they're already frustrated," he said.
On April 14, banks will be held responsible for any purchase amount over $50, rather than the whole amount of the purchase, according to Visa spokeswoman Rhonda Bentz, who noted the change was a response to gas merchants' concerns over rising prices, in an interview with the Arkansas Democrat-Gazette.
Retailers' current solutions to prevent large amounts of loss when forced to pay for chargebacks included shutting off the pumps once the purchase amount reached the credit cards' limit -- $50 with Visa and $75 for MasterCard.
"It creates a situation where a retailer has to make ... a choice between two equally unappealing choices: Either restrict the customer's ability to fill up and shut off the pumps at a certain limit, or allow the pumps to continue to fuel, but risk not getting paid for the transaction," Jeff Lenard, spokesman for the National Association of Convenience Stores, told the paper.
However, the company set up the system to prevent fraud.
"It's to protect both merchants and cardholders, because as the transaction amount goes up, so does fraud," Bentz told the paper. "So we're focused on reducing fraud within the system, as well as defending merchants and cardholders from becoming victims of fraud. That's where we fit into all of this."
When a customer uses a Visa credit card at gas pumps, a computer ensures that there is at least $1 available for credit. By setting the spending limit, a fraudulent transaction, or if the customer exceeds the credit limit, the result is no more than $50.
According to Visa, 95 percent of the card company's gas transactions are under $50, with the average purchase at $29. In addition, only a small section of the remaining 5 percent actually end up as chargebacks.
However, there are some ways to circumvent the protections. If the pump shuts off, customers can go inside the store and ask employees to authorize another transaction on the card and resume pumping gas. There are no pump limits for transactions that begin inside the store, the report said.
Not all gas retailers follow the limits. San Ramon, Calif.-based Chevron Corp. allows customers at the pumps to exceed Visa and MasterCard credit card limits, according to Casey Callaway, a spokesman for the company. Chevron suffers the losses but adheres to Wright Express, Voyager, Discover, and American Express pump-limit guidelines, Callaway told the paper via e-mail.
The company exceeds Visa and Mastercard limits "in order to satisfy customer requirements and meet market conditions," Callaway said, adding that chargebacks from Visa occur daily, and each time Visa withholds all of the funds involved in the transaction.
The dispute is between the issuer and the bank, according to Joanne Trout, spokesman for MasterCard. "The cardholder and the merchant are only indirectly involved," she told the Democrat-Gazette. "It is up to the [bank] if they want to pass the liability down to the merchant."
That puts stores in a lose-lose situation, said Lenard.
"If you stop the pumps, it gives [customers] one more reason to come inside and scream at you, and that's certainly the last thing you want to see when they're already frustrated," he said.