Zero Dollar Authorization

February 20, 2013

Visa’s New Zero Dollar Authorization Helps Merchants Keep Consumers Happy

Many merchants that offer free trials and accept credit cards via the Internet, phone and fax, perform what is commonly referred to as a one dollar authorization on Visa credit cards and debit cards with the Visa logo before approving a customer for a free trial, subscription service or future charge. Now, merchants who accept credit cards and debit cards with the Visa logo online can run a zero dollar authorization instead.

In the past, running a one dollar authorization was the only way that merchants that accept cards via the Internet, phone or fax could verify that a credit card or debit card was valid and that the cardholder is who they say they are. Due to on-going problems, Visa announced its plan to allow merchants to begin running zero dollar authorizations instead.

The decision to allow merchants to run what Visa refers to as “ghost” authorizations came after finding that their dollar authorization program was prompting calls and complaints from consumers. Many consumers call Visa, banks and merchants directly after finding a charge on their statement for what is supposed to be a free trial. Even if the charge is expected to drop off the statement in the future, many consumers disapprove of the charge for a service or product they have not yet decided to buy.

In some cases, the transaction never drops off and the consumer winds up paying a dollar even if he or she decides to cancel the trial. This led to additional problems for merchants, banks and Visa. By the time the consumer calls the merchant directly to find out why his or her Visa credit card or debit card has been charged, they are extremely frustrated. At the end, placing a one dollar authorization on a consumer’s credit card or debit card was causing more problems than Visa, consumers and merchants bargained for. This is one reason why Visa is now allowing merchants to process “ghost” authorizations.

Merchants were losing a tremendous amount of business. To avoid problems, merchants are now processing “Ghost” authorizations. To do this, merchants simply have to configure their payment processor to transmit and run the customer’s name, address, credit card number, expiration date and CVV number for verification. For merchants who run these transactions online, their payment processing page can be configured to run these types of verifications automatically. After running this type of authorization, merchants will know that the credit card is valid and the cardholder’s address is correct.

Visa’s zero dollar program gives merchants the added reassurance they need when accepting credit cards. The zero dollar transaction is also helping keep consumers happy. Consumers like being able to try out a product or service without feeling as though they have to make an upfront payment. Although the one dollar may not seem like much, consumers who sign up for a free trial do not expect to pay anything until their free trial period is over. This is why so many merchants are taking advantage of Visa’s new authorization.

Merchants who have started running “ghost” authorizations have fewer issues to deal with and an easier time retaining new customers. If you have not started running zero dollar authorization, then you should consider how Visa’s new program can help grow your business on and offline.

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