Credit Card Processing

Visa’s Misuse of Authorization Fee

by Ben Dwyer

The Misuse of Authorization Fee is an assessment charge that Visa imposes on transactions that don’t follow proper authorization procedures.

Sometimes called “ghost authorizations,” misused authorizations are transactions that are neither settled nor reversed properly. The fee attempts to cut down on such authorizations.

Therefore, if you don’t follow a Visa authorization with a matching clearing transaction, you’ll incur the Misuse of Authorization Fee. You could also incur the fee in the case of a cancelled authorization not properly reversed. Visa currently charges 9 cents for each misused authorization, making it one of the higher assessment fees.

Misuse of Authorization Fee

As of 2022, Visa sets the Misuse of Authorization Fee at $0.09. That’s on the higher side for cents-based assessments, but you can avoid the fee by following proper authorization guidelines.

The Misuse of Authorization Fee is one of many assessment fees that Visa charges. It can apply in conjunction with other assessments, even on the same transaction.

Clearing or Reversing Authorizations

In order to avoid the Misuse of Authorization Fee, you’ll need to either properly settle or properly reverse all authorizations. You’ll need to settle transactions within 10 days of authorization (or 20 days if you’re a Travel and Entertainment business) or reverse transactions within guidelines for your business.

If you swipe the card and the cardholder cancels the transaction or you submitted the authorization in error, you’ll need to reverse the auth within 24 hours. If you accepted a card online, you’ll need to reverse within 72 hours. Many gateways and virtual terminals offer a reversal transaction type, but if you’re unsure how to do it, you can contact the gateway or your processor.

For businesses that regularly utilize authorizations with reversals, such as car rentals and lodging, Visa offers a best practices guide.

Verifying Cardholder Data

In the past, some businesses used a small authorization to verify cardholder details such as CVV and simply didn’t settle the transaction so that the customer wouldn’t be charged. Visa is trying to cut down on this type of authorization.

However, you can still verify cardholder data. Visa offers account verification through Zero Dollar Value authorization requests, which incur a smaller fee. If you need to verify cardholder details, it’s a good idea to follow the procedure for verification with the Zero Dollar Value authorization. The Misuse of Authorization Fee will not apply to those verifications.

Locating the Fee

Businesses that have interchange plus pricing or bundled pricing can usually see individual assessment charges, including the Misuse of Authorization Fee, on monthly processing statements. (Businesses that have “flat rate” pricing, the kind Stripe and Square offer, will not be able to see individual assessments.)

To find the fee, you’ll need a recent processing statement and some time to comb through the individual line items. Fortunately, many processors use easily identifiable names. In the two statement snippets below, the processors refer to the fee clearly. The first calls it “misuse auth fees” while the second specifies “Visa Misuse Fee.”

Visa misuse of authorization fee example

As you can see, both processors list the fee at actual cost ($0.09) and both specify how many transactions incurred the fee. In these examples, each business only had one misuse of authorization, resulting in a 9-cent charge for each.

Remember that you may not have this fee on every monthly statement. The Misuse of Auth fee only applies when you don’t follow proper authorization and reversal practices. If you see the fee regularly, it’s worth revisiting your current payment acceptance practices to limit how often you owe this particular fee.

Additionally, keep in mind that processors aren’t required to pass assessment fees to you at cost. Your processor could charge more than the 9 cents charged by Visa, keeping the difference.

However, ethical interchange plus processors will pass assessments at cost. Businesses that chose a processor through CardFellow are guaranteed assessments passed at cost by our legal agreement. If you have questions about your assessment charges, give us a call.

Lowering Costs

Typically, assessments aren’t where you should focus if you’re interested in lowering your costs, as they are too low to make a big impact. However, since the Misuse of Authorization Fee functions as a sort of “penalty,” it’s worth your time to make sure you’re limiting these charges. If you see a lot of Misuse of Auth fees on your processing statement, take a look at your payment procedures. Are you properly clearing transactions after authorization? If you cancelled an authorization, did you properly reverse the transaction?

CardFellow clients can rest assured that we check your statement carefully during your free audits. If you have questions about your assessments, give us a call.

Reducing Processor Markup

Although limiting charges from the Misuse of Authorization Fee will help your bottom line, assessments aren’t where you’ll save the most money. To secure the lowest possible costs, you’ll also need to ensure your processor charges a competitive markup. If they don’t, you’ll want to switch to a processor with a lower markup.

How do you find out? Use CardFellow’s free pricing comparison tool to see what you could be paying with competitive interchange plus processors. There’s no obligation, and we don’t share your contact info. Try it now!

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