Setting Authorization Hold to $0.00

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.
Once processed, it will then "authorize" the user for a specified amount.
- Generally, the customer is "authorized" for $15 on FasCard (or $100 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 on 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 account. Most commonly within 24 to 48 business hours. 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 customers are at the business.
It lessens the fees involved with each swipe or insert.
Validates that the customer has enough funds to pay.

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 and 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 prevents 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.

A Transaction Fee is defined an expense a business must pay each time it processes an electronic payment for an individual customer transaction. Typically, this fee is several cents, but is ultimately dependent on the processor.

A Daily Batch Fee is defined as the total dollar amount of credit card sales charged in a single business day that will be deposited into the business owner's checking account.

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. Not incurring numerous transaction fees.

Ensures Customers Have "Money to Spend", Before Spending

When customers are expected to use a varieties 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. In return, understanding that the customer will be able to fully transact over the course of their stay, without any interruptions from their bank or the processor.

Each Customer's Expenditure Varies

Due to the fluctuating nature of consumers, we will not know how much they will spend at any business. We may see certain businesses force their customers to pay a minimum for credit or debit card transactions due to these fluctuations. Simply because certain products might yield to a higher transaction fee percentage. 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.

Laundromats operate at a low-cost, which means that consumers will be able to utilize their services at a cost-effective rate.

Upsides of a $0.00 Authorization Hold

Without the use of an Authorization Hold, processors will have difficulties in accepting certain transactions and the customers 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.

Test-and-Trust Warning

If you are currently using Test-and-Trust as your method of authorization, you will not be able to assign a $0.00 pre-auth hold amount or test-and-trust amount. It must have a value greater than or equal to the highest priced machine.

Customer's 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 to 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 large percentage of the individual sale.

Pre-Auth Best Practice

Setting the Pre-Authorization Hold amount to the highest equipment price, or greater than it, is the best method for Pre-Authorizations. For example, let us look at the highest-priced washer and appropriate hold amount in the following scenario:

The most expensive washer's base price is set to $9.75.
It also has two modifiers (Extra Wash & Extra Rinse) that are priced at $0.50, each.
A customer will want to use this washer and its two modifiers, totaling $10.75.
Therefore, the Pre-Auth Hold Amount should be at a minimum of $10.75.
- Preferably greater since the end-user is expected to use additional equipment.