An individual signs a credit card (ACH) authorization form to give a third party (usually a vendor) access to their account to charge payments.
After a person fills out an ACH authorization form, the third party can deduct money on their purchases even when their card is not present. It is a huge advantage for businesses, especially with recurring transactions.
With an ACH authorization form, vendors do not have to worry about making unnecessary losses due to charge backs. The authorization form allows a vendor to charge their customer repeatedly for the duration of time that it is valid.
Carrying out transactions without a physical card can cause a lot of complications. Because several transactions now happen without the customer being physically present, merchants need a method to guarantee authentic transactions. Transactions don’t just happen between a customer and a vendor. The banks also have a role to play. They need to ensure that no fraudulent activity took place during the transaction. Financial institutions can step in when there are claims of discrepancy with a financial transaction.
Unfortunately, several people attempt to take advantage of businesses by calling the bank and claiming a fraudulent transaction after receiving their product. These forms help to protect businesses by giving them the legal right to charge a customer’s account.
ACH authorization forms help merchants and banks confirm the identity of the person initiating the transaction. The data collected in the ACH form will provide proper documentation that could be extremely useful during disputes between the customer and the vendor. By using ACH authorization forms, vendors can protect themselves and their customers from becoming victims of fraudulent activities.
Necessity of Consent of the Cardholder
Before a vendor or any other third party can charge a customer’s credit card in their absence, they need to have gotten permission from the customer.
The cardholder gives consent by signing a credit card authorization form. For a credit card authorization form to be valid, the cardholder must consent by providing all the required details and including his signature.
Types of Credit Card Authorization Forms
There are six types of credit card authorization forms. Four are more general types, and two are more streamlined to fit a particular business type.
One-time credit card authorization
This type of form is only valid for a single payment. It gives the vendor consent to make a one-time-only charge on the customer’s credit or debit account.
Recurring credit card authorization
Vendors use this for periodic (daily, weekly, or monthly) charges. Many businesses that offer subscription services make use of this type of form.
One-time ACH authorization
This form is valid for a one-time-only direct bank transfer from the customer to the vendor. It is no more accepted after the transaction is complete.
Recurring ACH authorization
This form covers recurring direct payments from the customer’s account to the vendor.
Hotel credit card authorization
Guests who intend to stay at a hotel using someone else’s credit card have to fill this form. This form acts as proof that the cardholder is willing to bear the charges incurred by the guest.
Airline credit card authorization
Passengers use this to make payments for flights. The airline charges the flight costs to the person that filled the form.
Information Needed for Credit Card (ACH) Authorization
Signing a credit card or ACH authorization form is necessary for card-less payments. These forms usually demand specific information about the cardholder to verify his identity and prevent fraud.
These details help banks to make sure that there is no case of identity theft. Information required in a credit card or ACH authorization form includes:
For ACH authorization:
- Account Holder’s Name
- Address (of the Account Holder)
- Routing Number (an eight- or nine-digit number used to identify the location of the account holder’s financial institution)
- Account Number
For credit card authorization:
Cardholder’s Name: The cardholder should include their full name, as it is on his card.
16-Digit Number: These numbers are on the front of the credit card.
Expiration Date: The cardholder should state the expiry date of the credit card. It is also on the front of the card.
Security code: This is a three-digit number usually found at the back of the credit card. On the form, check for CVV, CSC, or CVC.
Billing address: This is an address connected to an exact type of payment, usually from a debit or credit card. Banks send bank statements to this address. Billing addresses are necessary for verifying the identity of the card owner. When filling your form, the billing address should correspond with the information your bank has.
In-depth Information required
Before you begin collecting payments from your client, you should ensure that they provide all the required details in their credit card (ACH) authorization form.
The cardholder must clearly state all the information that will define the limits of your transaction with them.
Such details include:
Frequency of payment
One of the vital details in a credit card authorization form is how often the payment should occur. The document must clearly state if the transaction is a one-time payment or a recurring payment. There are usually two checkboxes – one for recurring payments and the other for one-off payments. The cardholder should determine the type of transaction by ticking the appropriate box.
The billing information required
There is also a section where the cardholder can fill in his billing information. This section requires the cardholder to state their billing address (which should be similar to the billing address on their bank records). They should also include other means of contact like their phone number and email address. Usually, there is also space for the cardholder to fill in his city and zip code.
Details of the method of payment being authorized
The cardholder is required to indicate his method of payment. There are usually two columns in this section. One is for credit card payments, and the other for direct bank (ACH) payments.
Intent to authorize the defined payment
The cardholder should demonstrate their intent to make the stipulated payments. They can do this by writing how much they will be liable to pay for each failed transaction due to a lack of money in their account. The cardholder can go over this detail with the vendor if they wish and come up with a way to sort out this section.
How to Accept a Payment
If you accept credit card payments, you might need to guide your clients in filling their authorization forms. You also need to be aware of all the information that financial institutions need to deal with these kinds of payments.
As a business owner, you should pay attention to the following details to ensure that the entire process goes smoothly;
Step 1 : Point of sale
After the buyer has indicated willingness to fill the credit card authorization form, you should request them to fill in their information.
Step 2 : One-time charge or recurring
After stating their card/bank information, ask them if they would be making a one-time or a recurring transaction. Ensure that they indicate this appropriately on the form. This step applies to both credit card and ACH authorization.
Step 3 : Cardholder signs
After you both have crosschecked all their details, the cardholder can then proceed to sign the document.
Chargebacks and Disputes
Business owners usually bear the brunt of any transaction that goes wrong. Vendors are many times vulnerable by the cardholder. For most vendors, this is a cause for concern. Although vendors can dispute the buyer’s claims, there is a limit to the number of times they are allowed to do so without damage to their corporate reputation.
By encouraging their customers to sign a credit card authorization form before making any purchase, business owners can protect themselves against fraudulent customers.
Authorization Hold ($1)
Banks use authorization holds to verify transactions carried out with a credit card. The bank withholds the transaction amount as unavailable pending when the vendor clears the transaction or till the authorization hold falls off. For the buyer, authorization holds are like making a security deposit. The vendor makes some money in your account (ranging from $1 and above) unavailable pending when the transaction settles.
Vendors use this to protect themselves from the impact of fraud, chargebacks, and unnecessary payment cancellations. Authorization holds are commonplace in gas stations, car rental companies, and hotels.
Free Authorization Forms
Protect your business from loss by making use of credit card authorization forms. You don’t need to draw up an authorization form yourself. You can download credit card authorization templates here and start using them immediately. The best part is that they are free.
Are credit card authorization forms safe?
Yes, they are safe. Filling a credit card authorization form protects both you and the vendor from fraud or other unfortunate events.
How long is a credit card authorization good for?
In most cases, between 1 – 90 days. Until the cardholder clears the transaction or it falls off their account. The duration is usually in the document.
Is it safe to email a credit card authorization form?
No, it’s not. Sending any document with your credit card information via mail is not a safe option. You should explore other less risky methods of sending your credit card details across.
Running a business is already a challenging endeavor. Every business owner should take practical steps to safeguard their business against losses. Using a credit card authorization form is a safe and cost-effective way to do just that. You can’t keep losing money from credit payments gone sour. Any vendor can protect their business from friendly fraud by insisting that customers sign an authorization form before accepting any card-less credit card payments.