When a company charges a customer for a subscription-based service, they usually take the customer’s signature on a formal document. This document states that the company will charge a specific amount to the customers on a monthly or annual basis. It is taken as a precaution so that a customer does not file a chargeback against the business for deducting a certain amount from their credit cards on a regular basis.
The form used for customer consent is called the credit card authorization form. In this post, we will walk you through the details of the credit card authorization form, what it is used for, when you should use it, and how it works. Let’s get started.
What Exactly is Credit Card Authorization?
A credit card authorization form is a formal document signed by the cardholder who gives a company their permission to charge their credit card for a specific period of time. This document tells the duration for which the customer will be charged and the total amount the business will deduct from their account on a recurring basis.
These forms are mostly used for recurring transactions and when the credit card is not physically used at the store. Many retailers, especially those offering subscription-based services, have started using credit card authorization forms to validate the transactions and avoid any chargebacks. The authorization form protects a business from chargeback and other disputes that are likely to arise in the future.
Protection from Chargebacks
A chargeback occurs when a customer files a dispute against an inappropriate amount charged to their credit cards. They file this report to request a refund. It’s important to avoid chargebacks as much as possible since they can cost your business a lot of money in the long run. A business is highly likely to lose a chargeback request. In fact, in most cases, the customers get a full refund if the merchant fails to submit any valid proof.
Plus, a higher number of chargebacks means your business’ reputation will be at stake. The biggest advantage of using the credit card authorization form is that you don’t have to worry about chargebacks. Even if a customer issues a chargeback request, you can show their signed documents to the card-issuing company and have the case settled in your favor. That’s why an authorization form is a must.
What is Included in the Form?
The form includes information relevant to the merchant’s business and payment model. It can vary depending on the payment structure and nature of business, but most forms have the following components:
- Cardholder’s name
- ZIP code
- Seller’s name
- Card network and number
- Expiry date
- A statement authorizing the charge
- The sign of the cardholder
In addition to this information, the authorization form can have the full billing address of the customer, the security code, purchase amount and the details of the product, the merchant’s name and mobile number, and the cardholder’s personal details. The more information you add to the statement, the higher the security you get. However, a merchant must consider their customer’s experience before choosing the credit card authorization form template. A user buying a bike or a car might be willing to enter these details, but for a customer making a smaller purchase, these details seem irrelevant and too much for the purchase.
A Hard Copy or a Digital Copy?
You can use a hard copy of this form or send it digitally – whatever works for you. You are supposed to keep these cards in your system so that you can charge them without asking for their permission. For example, you can deduct the specific amount from their cards at the end of the month or year without asking for permission to validate the transaction.
The hard copy of a card authorization form is for those signing up for a gym membership plan, a health club service, or other services where they are required to make the payment in person. If your services do not require the user’s presence at your store, you can mail them a hard copy of the credit card authorization form and ask them to sign and send it back. If that sounds inconvenient, you can have the document signed digitally. Ask your customer to sign the document using the DocuSign tool.
When Do You Need a Credit Card Authorization Form?
As mentioned earlier, a credit card authorization form is needed for:
Recurring Payment Model: It includes utilities, bills, and subscription-based service payments. In a recurring business payment system, your customers are supposed to make the payments regularly, which means they need to remember making these payments. When you have the credit card authorization form, you have the customer’s permission to charge them every month without having to ask for their permission. There is an automated invoice and an advanced POS system that charges your customers automatically on time.
Card-Not-Present Payments: In these transactions, neither the cardholder nor the credit cards are available at the time of payment. Since the customer is not paying in person, the risk of fraud is higher in such types of credit card transactions. While there are payment gateways and many advanced encryption services to ensure safe transactions, a merchant needs additional security tools to ensure safe transactions.
In addition to these, the credit card authorization form is extensively used for B2B payments. As these are large transactions, the payment is made via credit cards mostly. It is important for businesses to create an authorization form for credit card transactions and get the signature of the customer to avoid chargebacks and any fraud.
The credit card authorization form pdf is available online. You don’t have to build it from scratch. Use the same PDF and get a few hard copies of the same. You can also send the PDF file to your customers via email and get a digital sign on the form.