As an ecommerce developer I have been involved with the implementation of hundreds of ecommerce websites and online payment systems. Each of these projects needed a merchant account to facilitate credit card transactions via the Web. Over the years I noticed that merchants would ask the same support questions over and over again. This article answers several of the most frequently asked questions.
Q. What are the different transaction types, and how do I know which one I should use?
A. Here is a list of the most frequently used transaction types and terms:
- Authorization
- AuthOnly
- Auth & Capture
- Settled
- Marked for settlement
- Reversal
- Credit
Authorization
When a successful “authorization” (or AuthOnly) is run on a credit card, it means that there were sufficient funds available for the transaction (the card is good) and that those funds will be held for the merchant to collect later. Typically an authorization is good for up to 30-days however, some issuing banks may differ. The customer’s available balance on the credit card will be reduced by the authorization amount to prevent their card from going over the limit or available balance.
Authorization or AuthOnly is the recommended transaction type for most ecommerce transactions. This allows a merchant to review the transaction and determine if they want to fill the order and capture the money. This step prevents having to refund the transaction as well as reduces fraud.
Mark for Settlement
When a merchant wants to capture the money from a credit card authorization they must change the transaction to “marked for settlement”. This puts the transaction in a queue (with other transactions that are marked for settlement) to be batched out for settlement later that night. These transactions can be changed back to an authorization up until the time that the batch is sent.
Settled
Typically the batch file runs in the late hours of the night. Once the batch runs the transaction status (or type) is changed to “settled”. You can expect the money to hit your bank account 2-4 business days from the time the transaction in settled.
Auth & Capture
There are times when a merchant should run a transaction as an “auth & capture.” This process gets an authorization and markets it for settlement all in one step. This is the preferred transaction type when selling downloadable products or subscription based products, and the customer gets the product immediately.
Reversal
A reversal can be run on an authorization when the transaction will not be settled. This frees up the available balance on the customers card. This can happen if you are not going to fill an order because it is out of stock or discontinued. The cardholder may request that a merchant releases the authorization to make the funds available.
Credit
This transaction is used to put money back on a credit card transaction that has been settled.
To lean about how merchants can avoid fraud read this article.
About the Author: James Curley is the founder and CEO of Mountain Media, an eCommerce and online payment solutions provider.
