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Merchant Educational Tools

By David H. Press

Has this ever happened to you? You signed up a high volume merchant with potential for producing a significant residual stream, but the merchant account was closed because of excessive chargebacks.

You can dramatically reduce the total number of your merchants' chargebacks by showing them how to alter their processes and procedures in order to better comply with the Association requirements. Remember, merchants are responsible for complying with card Association rules and regulations, but they are not permitted to see them.

Help merchants understand how chargebacks occur and show them the proper steps to take to prevent and defend these types of transactions. Reducing merchants' chargebacks reduces acquirer risk and potential acquirer fines from the Associations. While the card Associations do not allow merchants to have copies of the actual rules and regulations, they do provide other materials that you can distribute to merchants to help them follow the rules, which will help keep the account open and continue to provide you with residual revenue.

By supplying these card Association materials to merchants, you will give them the impression that you are there for them. And by having access to these materials when they have questions, merchants will also be less likely to make customer service calls.

In July 2004, MasterCard released an excellent 203-page "Merchant Rules Manual," which contains excerpts of MasterCard member publications that provide information about standards applicable to MasterCard merchants. (The manual is available on either Master-Card Online: or on MasterCard Merchant:

The MasterCard "Merchant Rules Manual" provides merchants with the MasterCard rules applicable to merchant acceptance of MasterCard- and Maestro-branded cards. MasterCard believes that merchants and consumers benefit if merchants have access to, and are encouraged to be aware of and conform to, rules that pertain to merchants' acceptance of these cards.

Remember, MasterCard and Visa members are obligated to comply with MasterCard and Visa rules and regulations at all times and any merchant from which they acquire MasterCard and Visa transactions must also comply with the rules.

MasterCard offers this manual for the benefit of any merchant that has entered into or is contemplating entering into an agreement with a MasterCard member for the purpose of accepting MasterCard cards, Maestro cards, or both. For example, the "Merchant Rules Manual" further explains the MasterCard rule that hotels, motels, car rental companies and cruise lines must request an authorization for an estimated transaction amount if the estimate exceeds the applicable floor limit.

The merchant may also request an authorization for any additional estimated amounts as needed. But, the manual explains, car rental transactions may not include charges representing either:

  • The vehicle insurance deductible amount, or
  • An amount to cover potential damages when the cardholder waives insurance coverage at the time of the rental.

Car rental card acceptors must disclose to the cardholder at the time of the rental the amount for which the authorization was obtained. This has been a common reason for chargebacks for the smaller car rental companies that you are likely to sign up.

The "Merchant Rules Manual" also provides information on the process to follow for an unsigned card.

For example:

"If the card is not signed, the card acceptor must:

  • Obtain an authorization from the issuer
  • Ask the cardholder to provide identification (but not record the cardholder identification information)
  • Require the cardholder to sign the card The card acceptor must not complete the transaction if the cardholder refuses to sign the card."

Both Visa and MasterCard have produced other materials designed for merchant education that are available either for free or a nominal fee. You should provide these materials to your merchants, particularly those that might have chargeback problems. Materials are also available that you can distribute to merchants based on their Merchant Category Code (MCC), or their use of Address Verification Service (AVS), the last three numbers on the card signature line: Visa's CVV2 or MasterCard's CVC2, etc.

Many merchants don't believe that their processor provides them with the support they need to deal with chargebacks. Taking the time to work with your merchants to get them properly set up and educating them on how to protect themselves from chargebacks can go a long way toward maintaining customer satisfaction.

By being proactive and supporting the merchant through education and throughout the chargeback process, the acquirer also reduces its own risk exposure. It only makes sense to spend extra time with a merchant who could either make you a lot of money or cost you a lot of money because of chargeback losses and fines. Talk to your member bank about the availability of MasterCard and Visa materials and start to use them in an educational program for your merchants.

David H. Press is Principal and President of Integrity Bankcard Consultants, Inc. Phone him at 630-637-4010, e-mail him at or visit


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