Credit Card Capture
Credit or debit card transactions still make a big part of today's payments. As more and more transactions are occurring online, the need to understand how debit and credit card payments work is increasingly important. At least to know its basic function, or go through the detailed process, and for merchants to learn how it can grow their business. One good eCommerce term to understand is credit card capture.
What is credit card capture?
A credit card data capture, simply known as capture, is a legal step that happens during card payment processing. It takes place after a payment authorization officially transfers a customer’s fund into the merchant account.
Card capture happens when a pending payment becomes complete as the business gives the go signal to move the confirmed transaction funds from the issuing bank’s account, into the account of the business.
Note that processing fees will apply during the process. Any transaction that will deal with a chargeback or a refund will get an added fee to move the funds back to the account of the customer.
How does credit card capture work?
After a customer provides their credit card details and proceeds to go through with the payment, the card capture process will start. It will verify the issued credit card number, the bearer’s personal identity information, and the available funds. The issuing bank will then authorize the transaction and create a billable transaction record.
The merchant will then deliver the goods or proceed with the service. The ultimate goal of the business is to finalize its responsibility and the authorization is an important step in the process. It establishes a vital, legal right for the business which is to capture credit card information.
What does it mean to capture a credit card?
Capturing a credit card will give the authorization and legal rights to a merchant to bill a customer for the product or service. It's establishing a legitimate right when a transaction using a card is officially authorized. The business now has the right to collect funds from the account of the customer and transfer it to their merchant account.
A majority of card captures can happen within minutes after a specific authorization, so some banks wait for a couple of business days before the funds become available. Note that delaying the capture and breaking it down into smaller amounts is a legal right of the vendor.
For a customer and their servicing bank, the capture plays a major role in resolving legal disputes. If they complain about debited funds from their account, their servicing bank can present them the capture. It serves as proof of their voluntary authorization and agreement to a certain transaction that caused a charge in their bank account.
How to capture credit card information?
A business needs a merchant account with a payment processor that offers storing of cardholder’s information to keep it on file. Payment processors enable businesses to charge a credit card on file without showing its account number.
There are many merchant accounts online that provide this type of service. Before availing, make sure you understand their fees.
Does a credit card capture expire?
Yes, the capture has an expiration period and may vary from card to card.
When a merchant doesn't set up an automatic capture on their bank’s credit card processor, they must do manual transferring of funds.
It is also possible for a customer to request a merchant for delayed debiting of funds, like the process with post-dated checks if the amount charged is more than the amount currently on account.
Finally, the last capture should include the delivery of goods or satisfactory completion of a service. If the items bought are not received or the service is not completed, it will lead to a chargeback.
What is the difference between authorizing and capture?
Payment authorization including pre-authorization is the initial procedure in the payment process. It takes place before a pending payment capture. When a merchant swipes the card of a customer, their issuing bank will receive an authorization request as a confirmation that there is an available fund to complete the transaction.
The process is the same in both credit and debit card transactions. The available funds or the credit limit are verified to proceed. Once the servicing bank is done checking the account of their client and if it has sufficient funds to cover the purchase, an approval will be sent back. If there is not enough funds or fraud and any suspicious activity is sensed by the bank, the request will be denied.
After authorization of payment, the funds will be placed on hold. It is called a pending payment and can't be spent anywhere else during the entire duration of the hold.
Note that merchants don't have access to these funds unless they enabled an instant credit card capture. Merchants have the option to set up their system to automatically capture payments after approval or set up their system for a manual capture during the process of requesting authorization.
Requesting authorizations may last a week depending on a merchant’s processor. If they don't capture the funds within the stated time frame, the pending payment will be erased from the account of the customer, bringing the available balance before the purchase.
Importance of delayed credit card capture payment
In reality, most businesses gain advantage from delayed automatic capture instead of setting a system manual capture. Aside from major credit card brands like Visa and Mastercard recommending delays in capturing cards, it also creates a buffer for businesses who ship items or to complete their services.
For example, you offer a professional house cleaning service. After a customer fills out a request for your service in person or online, your initial step is to place a request of authorization for the funds. The authorization request will confirm your customer’s ability to pay.
If the authorization request was declined due to a specific reason, you can save your time and money from buying the cleaning materials needed for their home. Simply put, the risk of uncompensated service or fraud is lessened.
On the other hand, if the request is approved, you may proceed with their service request. After completion, you can change the status of the payment to capture.
Also delaying card captures lessens costly chargebacks. Since the requested amount has not yet moved until credit card capture happens, you can just delete the transaction.
if you can't provide the service, proceed with the transaction due to unexpected situations, or if the client requests for a refund. Doing so will save you from chargeback and additional interchange fees.
How to change the type of credit card capture setup in a business?
Changing the type of card capture depends on the merchant provider handling the business, but the majority allows shifting from automatic to manual capture or vice versa. Contacting the provider can further inform the merchant about the whole process.
Merchants that are looking for a payment processor, whether a new business or existing business, can contact Allied Payments. Our team specializes in everything from retail to high risk credit card processing services. Contact the Allied Payments team for more information or to get started today.