A credit card authorization form is an official document signed by the cardholder to grant permission to the merchant. The merchant is allowed to make payments on the card for a specific amount of time. This form is usually used by businesses to charge a cardholder on an ongoing basis. With the help of this form, businesses can charge the amount monthly, per quarter, or intermittently.
Moreover, it helps you to avoid chargebacks that typically occur when a customer disagrees with a charge from the business. For businesses, chargebacks can create huge problems. When they occur you have to do a lot of paperwork so they are time-consuming. Hence, this form protects your business. It also acts as proof that the cardholder allowed you to charge the card.
What to include in a credit card authorization form?
Here are some basic components that standard credit card authorization forms must include;
Information of the cardholder:
The information of the cardholder includes his full name, billing address, and contact details.
Information of the credit card:
Here you have to include the type of credit card, credit card number, expiration date, and security code.
Business information:
It contains the name, address, and contact information of the business.
Statement:
State a good statement of authorization that applies to the business. You can also involve the type of transaction either single or recurring. Additionally, a well-written statement will definitely provide you the authorization.
Affix signature:
Affix the signature of the cardholder to make the document valid and write the date.
Different types of credit card authorization:
There are three most common types of credit card authorization;
Authorization form:
It is the most common type of credit card authorization and includes all information about the cardholder and his credentials. However, in some states, it is criticized for lack of legal binding.
Authorization letter:
A letter is written by the cardholder in which he authorizes the merchant to charge his card. It should contain the signature of the cardholder to be legal. It contains important information related to the details of the card. The card should also include the charged rate.
Verbal authorization:
It is the least common type of credit card authorization that involves the use of words. No one can use it because it doesn’t count in a court of law.
Why do you require a credit card authorization form?
By having a credit card authorization form, you don’t need customer permission every time to process transactions. You can either use these forms in hard copy or digitally. It is a good idea to have various hard copies available for in-person transactions like someone signing up for a membership at a health club, etc.
You can mail a physical copy or email a digital copy of the credit card authorization form in case of transactions that don’t happen in person. This way, the customer can fill it out, sign it, and send it back on their own time.
Now, small businesses are using more advanced technologies that enable you to offer digital credit card authorization forms in person too. Customers can fill out the forms more easily in case you have tablets set up at your place of business.
Uses of credit card authorization form:
You need a credit card authorization form in a number of conditions. Here are some scenarios where you can use it;
- During transactions, when the cardholder isn’t present physically you can use it. For example, when customers place orders online then these forms are very beneficial. Also, it is very useful for businesses that don’t have traditional shops. These forms are also crucial for a business that doesn’t operate with physical infrastructure.
- It is used for credit card billings that can happen in the future. During the transition, the customer’s credit card doesn’t get charged rather than showing a pending status in the account of the cardholder. Typically, we can say it as ‘authorization only’ transactions. Car rental companies and hotels use this type of transaction. It is also used when a customer wants to put an item on hold.
- For authorizing recurring or ongoing payments, this form is also used. These transactions are known as ‘card on file. Furthermore, it is used by cardholders to authorize the business to charge for recurring payments. For instance, it is used for subscription-based services like subscribers used it to charge cardholders for the subscription each month.
The advantages of using credit card authorization form:
Things become complex during dealing with customer payments. That’s why now customers prefer a credit card for payments. So each business should create and use credit card authorization forms. There are a lot of authorization form templates and you can download them easily. They contain all the necessary information and also you can modify the information as needed. Let us discuss some benefits of using these forms;
Efficiency:
You can gather information about the customer and the payment method by using this form. It is the most efficient way to collect information. It makes the process of record-keeping easy for businesses.
Assists in developing customer trust:
You should provide your customers a proper form to sign instead of providing them a piece of paper to write the payment details. It develops customer trust. A well-written form indicates your professionalism and informs your customers that you properly document transactions.
Protects the business:
Credit card payments come with risks but these forms help you to reduce those risks. Customer signatures make you more confident about the transaction’s validity.
Things to consider when accepting credit card authorization:
Here are some things that you have to consider when accepting this document;
- Don’t store the security code data of the customers when performing transactions. If you do this then take care of the information. However, it will create a big problem for your business if you aren’t able to take care of such sensitive information.
- When the transaction has done, send a sales invoice to your customer via email. This invoice contains the details of your business, products, or services that your customer has bought. You should also mention cancellation and refund policies.
- Never ask your customer to fax back the form. You should ask them to make their payments on an online page.
- In some cases, the billing and shipping addresses are different. So, you have to ask the customers to send a separate document for each.
- Next, inform the customers that they have to reply to you through email instead of signed faxes. After that, customers can send the authorization code that you can use as proof when the need arises.
Accepting payment with a credit card authorization:
There are two steps involved in a payment card transaction. The authorization of the purchase is the first one. It doesn’t allow the transfer of funds to the merchant. But, it lets the business know that the funds for a purchase exist. Then, with an authorization request, the merchant contacts the cardholder’s bank.
The account will be settled and the payment transferred in case the authorization request is approved. Furthermore, the merchant is allowed to place a hold of authorization on the account of the cardholder. This reduces the credit limit of the customer until the transaction is completed.
The processor has to provide the following information in order to accept payment with a credit card authorization;
For credit/debit card authorization
- Cardholders Name
- 16 Digit Number
- Expiration Date
- Billing Address
For a bank account (ACH authorization)
- Account Holder’s Name
- Address (of the Account Holder)
- Routing Number
- Account Number
Difference between credit card authorization and Automated Clearing House (ACH) authorization form:
An ACH authorization is a payment that authorizes a business to charge a bank account of a customer for payment. To charge a checking or savings account, this form provides a signed agreement.
On the other hand, a credit card authorization form provides authorization to charge the credit card account.
Conclusion:
In conclusion, a credit card authorization form is an official document that contains all information about the cardholder and his credentials. This form makes you able to gather the customer information and payment method. You should create a well-designed form that indicates your professionalism.
Faqs (Frequently Asked Questions)
A card on file occurs when a cardholder gives permission to a merchant to store their payment details. This also allows them to use these details for future purchases.
Make use of an online template to fill out a credit card authorization form. You must make it in a written format. Also, it must be printed by the merchant. The cardholder also has to fill it out and sign it.
These are as follows;
1- Reduces fraud and chargebacks
2- Minimizes errors
3- For your business, builds a positive reputation
4- Establish customer trust
5- Enhance payment efficiency
