Table of Contents
Introduction
If you accept credit cards at your business, you can charge the cost of your services or products to your customer’s credit card with their consent and process the payment later if the card is unavailable. But do you know that if the customer later denies the transaction and complains to their financial institution, the credit card company may refuse to pay you? By this time, you may have already supplied the goods or services you charged for, which means you’d incur a loss.
The above scenario happens far more than you’d think. Therefore, as an astute business owner, you need an extra layer of security to ensure that you get paid when you engage in such transactions. These circumstances are what credit card authorization forms are for. These forms document your customer’s consent to charging their credit cards, reducing your financial risk.
Would you like to incorporate credit card authorisation forms into your business practices to ensure your peace of mind? Please read on as we discuss how credit card authorisation forms work to help you get started.
What Are Credit Card Authorisation Forms?
A credit card authorisation form, also called a credit card consent form or credit card authority form, is a formal document that permits you to charge a customer’s credit card so that you can securely process your credit card payments in the customer’s absence or without the physical presence of the customer’s credit card and avoid the risk of chargeback claims.
A chargeback occurs when a credit cardholder disputes a charge to their credit card by alleging that they never engaged in the transaction or for any other reason. When a chargeback claim is made, the credit card issuer (bank) may reverse the charge and return the money to the cardholder’s account.
Suffering repeated chargeback issues could cripple your business in the long term. But with a credit card authorisation form, you can successfully dispute such claims and prove that the customer consented to the transaction and your charge, thereby increasing your chances of getting your money back.
Well-prepared credit card authorisation forms are also a good way to document and track sales, which could make it easy to prepare GST tax invoices when necessary.
If you’re new to using credit authorisation forms for your business, you might wonder how to best incorporate them into your business operations. You can start by updating your terms and conditions document.
If you run an online business, the terms and conditions page is probably the first thing customers see when they visit your website. You can incorporate your credit authorisation form into that page and make it so that every customer who agrees to your terms also agrees to a credit card authorisation.
Get a free Request For Tender template when you sign up to Lawpath today.
When Should Businesses Use Credit Card Authorisation Forms?
A credit card authorisation form is essential for your business if you do any of the following;
You Provide Products or Services to Customers for a Fee and They Pay by Credit Card
If you provide services to customers in advance, or your services require a recurring subscription, having a credit card authorisation form clarifies the customer’s payment method, so you don’t have to make constant requests for it.
You might also use this form as authority to reserve the funds in a customer’s card so they can be processed later.
You Do Not Have an EFTPOS or Other Credit Card Terminal
Credit card authorisation forms are primarily associated with transactions where both parties do not meet physically, or the customer’s card is not physically present at the time of the transaction. But it could also be relevant for those who run physical stores or offices but do not have an EFTPOS (Electronic funds transfer at point of sale) device or any other credit card terminal to process credit payments on the spot. In such instances, instead of losing the customer, have them complete a credit card authorisation form so you can process the payment later.
Your Business Does Not Operate in a Retail Store
Sometimes, online shoppers experience buyer’s remorse after a few days. But instead of going through the formal return process for the goods they purchase, they may initiate a chargeback claim, hoping to get their money back.
If you run an e-commerce store or any other type of business online, you’ll need a credit card authorisation form to protect your business from such customers and their fraudulent chargeback claims.
You Want to Have a Clear Record That Customers Consent to Transactions
A signed credit authorisation form proves that your customer consented to the transaction. As stated earlier, this type of proof is crucial to fight fraudulent chargeback claims that could affect your business finances and reputation.
You Want Confirmation That a Customer is Aware of How Much You Will Debit Their Account
A credit card authorisation form will typically contain details of the amount to be charged either as a one-off or periodically, depending on the nature of the transaction. This ensures that the customer knows how much will be charged to their card before the payment is processed.
Key Components of Credit Card Authorisation Forms
Having a credit card authorisation form requires legal compliance and consistency to ensure the document adheres to guidelines and is easy for consumers to understand. Ensuring that key components of credit card authorisation forms are integrated within the document is central to ensuring you face no legal repercussions.
Key components of credit card authorisation forms include:
Cardholder Information
A completed credit card authority form should contain the cardholder/customer’s details, such as their name as displayed on the credit card, address, and other contact details for authentication purposes.
Transaction Details
The transaction details for which the authorisation is issued must be clearly stated. For example, if the customer is paying for a recurrent service, the form must state whether or not the authorisation given is for a one-off charge or would cover recurrent payments for the same service.
Terms and Conditions
A completed and signed credit card authorisation form constitutes an agreement between you and your customer. As such, it should clearly state the terms and conditions governing how the form will be used.
Additional Notes or Instruction
Every transaction is unique, and a good credit card authorisation form should allow that uniqueness to be expressed. You should be able to create additional notes or instructions that can be modified to properly capture the essence of each transaction.
Description of Products or Services Being Provided
A credit card authorisation form must specify the nature of goods or services the customer will be charged for. That way, the customer is fully aware of what they are paying for before they sign.
The Authorisation Clause
This is a statement that affirms that the customer has permitted you to charge their card for the agreed transaction.
Signature
The customer must sign the form for the authorisation to be effective.
Our template at Lawpath incorporates these essential elements to ensure you have the proper authorisation document to help secure your business.
Common Mistakes to Avoid in Credit Card Authorisation Forms
When using a credit card authorisation form, you must be careful to avoid certain mistakes that would either render the authorisation invalid or lead to legal issues for you and your business. Some of those mistakes include the following;
Mismatched Information
The information provided by the customer, including their name, signature, and address, must match the information on the credit card. Mismatched information is often a sign of fraud or identity theft, which could lead to chargebacks. Ensure you confirm the accuracy of customers’ details provided in the form before you release your goods or render a service to them.
Inadequate Encryption
Credit card authorisation forms are sensitive documents because they contain crucial information about the person who signs them. You must ensure that the forms you collect are properly encrypted and secured so that they cannot be used for fraudulent purposes. Otherwise, you could be legally liable if a customer’s information is misused.
Lack of Accessibility
Inaccessible credit card authorisation forms are a common problem for online businesses and those who use digital forms. If you use digital or online forms, ensure that the platform is optimised for a satisfactory user experience so that you don’t lose customers while trying to protect your business.
Inadequate or Ambiguous Terms & Conditions
The terms and conditions stated in your credit card authorisation form must be written in clear and easy-to-understand language to avoid any confusion. The customer could misinterpret unclear wordings which could lead to the very chargeback claims you were originally trying to prevent.
Conclusion
Credit card authorisation forms protect your business from fraudulent chargeback claims and may also serve as records of your business transactions. Incorporating them into your business operations is a good idea, especially if you process credit card payments without the physical presence of the cardholder. The form should contain specific details showing that you have the right to charge the customer’s card.
However, you must also ensure that the customer provides details that accurately match their credit card when completing the form and take extra steps to secure the form once completed. You can prepare a credit card authorisation form yourself, but the process could be tasking and require time and dedication. Preparing a proper form also requires some legal skills and knowledge to avoid any ambiguities that could invalidate it and affect your ability to process your payments.
For the best results, consider adopting a template prepared by legal professionals to ensure that the forms you issue your customers meet the necessary requirements and can help you protect your business to the maximum extent possible.
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