Recurring Transactions refer to the instance when consumers authorize merchants to charge their credit card or debit cards a specific amount on a regular basis – such as monthly, quarterly or yearly – for a series of goods or regular services.
An example of a typical recurring payment plan is for a monthly magazine subscription or an internet service. Largely speaking, recurring transaction plans are set up for an indefinite period of time and the charges set forth between both parties will occur continually until the cardholder cancels the plan. There are a fair number of factors that inherent in a recurring payment plan, which make them particularly vulnerable to customer disputes and the resulting chargeback’s that are difficult on merchants. Since the aforementioned payments have been pre-determined and can continue to go on for months or years, it is easy for the customer to forget or lose track of them, or the customer credit card account may be canceled, expired or the account number to be changed.
There are several things that a merchant must do to prepare to prevent chargeback sand other serious fraud prevention actions that may diminish the value of a merchant’s business in the eyes of credit card companies.
If merchants process recurring transactions and charge a cardholding member’s account periodically for recurring goods or services, the cardholding member shall complete and deliver a written request for such goods or services to be charged to their account and submit this to the merchant. The written request must at least specify the transaction amounts; the frequency of all recurring charges; and the duration of time that the cardholding member’s permission is granted. Of course, the merchant must retain this written request for the duration of the recurring goods sales or services provided.
Of course, if the recurring transaction is later renewed because of revised terms that arise or simply because specific time has passed, the cardholding member will complete and deliver another written request for the continuation of such goods or services to be charged to the cardholding member’s account and submit this to the merchant again for their records.
Many cardholding members, of course, will, in time, cancel services that they deem not useful. Merchants will then discontinue their service or sales actions after receiving a cancellation notice from the cardholding member or a response to an authorization request that the specific credit card is not to be honored for any of various reasons.
For the most substantial consumer experience and in order to minimize merchant risks regularly associated with recurring payment plans, merchants should incorporate the following practices into their recurring payment plan procedures:
Store the credit card’s expiration date on file and include it in all authorization requests, as well as customer account information in a secure manner. Make sure to contact the customer cardholder if their credit card is nearing its expiration date and obtain the new expiration date. Credit card security code, however, should not be stored at all in order to reduce fraud.
Merchants should always employ the use of Address Verification Service or AVS.
In merchant records, it is best to clearly identify recurring transactions when they are processed. Merchant payment processing services providers largely take care of identifying recurring transactions.
Customers should always be notified before processing a recurring payment series. Notices should be sent as a hard copy or via e-mail to customers no less than ten days in advance. In this notification, merchants should summarize the card processing amount, date on which it will be charged and terms.
In the name of good customer service, it is best to promptly follow-up on customer complaints and reservations. Respond quickly to customer complaints and address their issues immediately. It is likely that simple solution will continue a lively extended service or goods contract that may have otherwise been terminated.
Finally, it is always best to honor a cancellation request from a customer. Upon receiving a cancellation request a merchant should immediately cancel the recurring plan and issue a credit, if at all applicable. Merchants should provide customers notification that their request has been fulfilled and the payment plan has been halted. In the event of a chargeback resulting from an unfulfilled cancellation request, the cardholder does not have to prove that this request was made. So it is always a good idea to record the cancellation as best as possible and provide documentation.