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Why CCI uses Pre-Authorization Holds with FasCard

FasCard processes credit card transactions in a similar fashion to gas station pumps. We can compare the two in the following scenario:  

• A customer swipes or inserts their credit card at the terminal (reader). 
• The terminal will then begin "processing" their transaction. 
  • "Processing" means the terminal is talking to the customer's bank to verify they have sufficient funds available.
• Once processed, it will then "authorize" the user for a specified amount. 
• By default, the customer is "authorized" for $15 on FasCard (or $50 at the gas station pump). This amount can be modified.
• Once the customer has concluded all of their transactions, the final total amount spent within the hold amount(s) will be presented in their bank account. 
  • This amount will be deducted from the hold amount, returning the difference of what they didn't spend, to the customer's bank account. Most commonly within 1 to 2  business days. In some cases, taking up to 30 business days. 

A few reasons for this method of processing is because: 

• The system cannot anticipate the amount a customer may spend.
• The amount of time a customer will spend at your business differs from each visit.
• It lessens the fees involved with each card swipe or insert.
• Validates that the customer has enough funds to pay for all equipment. 

Downsides of a $0.00 Authorization Hold

There are many downsides to assigning a $0.00 Authorization Hold due to the way the FasCard system was designed and how it is expected to operate in accordance with the processors involved. The biggest concern is the fees involved when assigning the pre-auth amount to $0.00, among other inconveniences. 

Transaction & Batch fees

All processors compatible with the FasCard system charge merchants a transaction fee associated with every card interaction and a daily batch fee. This does sound like a lot of fees for credit card processing when individual turns are counted. Yet, FasCard's Authorization Holds prevent the multiplication of Transaction Fee's by defining the pre-auth hold amount as a single transaction, regardless of how many times a customer may swipe their card. If a customer were to exceed the initial hold amount they were approved for, they will be charged a second pre-auth hold amount of the same value. This method of transacting will continue up to the maximum daily amount allowed. 

By designating the pre-auth hold amount as the individual transaction fee, operators can avoid a large sum of fees from their lower-priced equipment. For example, if there is a dryer that charges $0.25 for 5 minutes of drying time, a customer who wants 40 minutes of drying time will have to swipe their card eight (8) times. If the transaction fee for each of those swipes was $0.07, that would add up to approximately 28.6% of the total vend of the dryer. Hardly leaving any room for profit. Therefore, by placing a feasible hold amount to cover the transaction fee and other equipment, merchants will pay a much smaller percentage of the customer's total charges throughout the business. Thereby, not incurring numerous transaction fees. 

Ensures customers have "money to spend", before spending

When customers are expected to use a variety of services over an extended period of time, it would be helpful to know if they have sufficient funds in their bank account before transacting. Therefore, instead of charging the customer on each individual machine, not knowing if they can continue further, we can transact them for an appropriate amount of money from their bank account to smoothen the process. This prevents lags in the system attempting to process multiple transactions at one time. Instead, the customer will have been authorized for a single transaction that grants them the ability to continue servicing their needs without interruption from their bank and/or processors.

Each customer's expenditure varies

Due to the fluctuating nature of consumers, we will not know how much they will spend at any business, generally speaking. Because of this, we may see certain businesses require their customers to pay a minimum for credit or debit card transactions due to these fluctuations. Simply because certain products might yield a higher transaction fee percentage as compared to others (e.g., a washer vs a dryer). The same principle of having a minimum amount needed to transact is similar to using pre-authorization holds. The goal here is to reduce the effect of the fees it has on individual transactions, especially inexpensive ones. This is because laundromats are considered to be low-cost businesses. 

Upsides of a $0.00 Authorization Hold

Without the use of an Authorization Hold, processors will have difficulties in accepting certain transactions and the customer's issuing bank might place a stop on their card until further action is completed. These discrepancies are due to the numerous amount of times a customer may swipe or insert their card, especially on dryers. Regardless, the only advantageous proponent to leaving the Auth/Hold Amount at $0.00 is allowing customers to pay the price they select (this depends on your processor).

Customers are charged the selected vend price

Without indicating to the FasCard server how much a customer is spending (or taking out of their bank account), the FasCard system has to initialize the transaction at the reader level. This is possible, but additional charges may come from the processor once they receive the transaction from FasCard. If that is the case, the customer will be charged whatever amount the processor determines is apt.

Once all transactions have ceased for the day, the processor will then account for each individual transaction and charge the merchant the agreed-upon Transaction Fee for all individual payments. The fee will always be the same unless stated otherwise by the processor. As explained in a previous example, these transaction fees can amount to a large percentage of the individual sale. 

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