Credit Card Processing Question

Any of you guys out there having a problem with your credit card customers. I’ve had 5 people call me over the past 6 months who said i’ve overcharged them for a sale. After calling up the Credit card processor, they are telling me that some cardholders accounts automatically have a 20% gratuity added on to the sale. & if there is no gratuity, the money is refunded to the customer.

For example. customer orders and gets charged $10. They check their balance online the next day and it says $12. Then the money gets put back within 24-48 hours. The sale then goes back to $10

This makes absolutely no sense to me. The customers call up and they’re accusing me of overcharging them, and they’re upset. What if they had almost nothing left in the account, NSF, overdraft sets in. This really isn’t fair to the customer.

Anyone else out there dealing with this?

Anyone out there in merchant processing can answer to this?

I was told it was to protect the customer and my shop. What if they have $21.00 in their account (debit card)? The card processor approves the sale for $20.00. The person tips the driver $2.00. They are overdrawn. It is supposed to protect both parties… Just tell the customers to call their credit card company and have them explain it.

Your processor or your software has control over this - no ones bank automatically adds the 20% - it’s either your software or your processor doing it.

We use 911 Creditline for our POS based authorization - and we used to have it set to add 20% to the authorization too. After 100’s of complaints from debit card users who run and check their account minutes after buying a pizza, I changed the software so it doesn’t add anything. There is no reason to do it, and all it does is make customers think you are ripping them off.

You only get this complaint from debit card users because their banks actually hold out the amount from their available balance until their transaction actually settles. I too would be irate if I spent $10 and for no reason am having $12 held from my available balance. Real “credit card” users don’t care.

They don’t “refund” the money.

When you swipe a card it checks to make sure there is enough money plus a 20% gratuity. Once you batch the credit cards it charges for the actual amount.

So if you are batching each day it only holds it for less than 24 hours. Run your own debit card so you can see what happens. We have had a couple of calls over the years but after explaining everyone is fine.

Well, technically they don’t “refund” the money - but in reality, it is no different.

Once the authorization is done, the money is gone from the customers available balance. To them, the money is gone. Then they have to wait for your batch to hit before they get that money put back into their available balance. If it is on a weekend, it might be 3 days before they have use of that money again.

This is the curse of online banking. Customers go online and see the approval amount thinking it is the final charge. Our G.M. got so sick of fielding constant calls from customers (some extremely irate!) that we finally set the gratutity amount for approval to zero.

Have your software reprogrammed to do likewise and save yourself the headaches.

My OLD processor handled it the same way saying it was their restaurant program (basically only for high-end places that ensure the customer has sufficient amout to cover tips). TRUST ME have them change it or change processors,not worth the headaches…your customers will think you are ripping them off. This practice makes no sense for pizzerias whatsoever

Here is my “2 cents”

The reason for the 20% above ticket is to help YOU, the Owner, save money in processing charges.

Simply put IF you settle a transaction that is Higher than the Authorization amount the transaction gets downgraded to a different “Discount Level”

For example:
Let’s say you pay 1.25% for a swiped Debit Card. A $10 charge authorized at $12.00 and settled for $11.50 gets charged 1.25%

Now, if you set the bump to $0.00, a transaction authorized at $10.00 and settled for $11.50 will incur a surcharge of say 0.75%. which means instead of paying 1.25% you will now pay 2%.

This surcharge is paased down to YOU from either Visa or Mastercard through your processor.

Send me an e-mail if you any other questions about CC Processing.

good luck explaining that to a customer on the phone who thinks you are trying to rip them off…not worth the hassle even if it does save you some pennies!

I suppose that depends upon perspective.

If you process 4000 transactions per month and pay an extra 5 cents per trans that’s an extra $2400 per year in fees.

Those nickels and dimes add up. My job is to help you put those nickels in the “piggy bank” through education and setting you up to pay less to start with (or, in the case of an existing business, switching you to a lower rate).

I am about 500 transactions per week, but I still don’t like that rationale…i have dealt with approx 10 disgruntled customers when we had this sort of problem with our old processor in only 3 MONTHS! The way I look at it a regular customer at $20/week that you might lose for LIFE is worth alot more.
I am glad that my RBSLynx processing I have now is not set up like that or else I would have switched.

Scott -

I understand your point - maybe you can help us explain this to our customers.

This % above ticket thing isn’t ever an issue with true credit cards - the issue comes up when the card is a debit card - combined with real-time information available to customers.

How do you suggest we explain to our customer why we their bank says we are holding $24 from their checking account instead of the $20 we are supposed to be holding? In fact, these monies are unavailable to the customer for some period of time - so in reality, they think that we are holding those funds. I guess in fact we are since we purposefully authorized their card for 20% more than they spent. What gives us the right to do this?

The customer doesn’t really care about the explanation. Maybe MC and VISA should stop charging these crazy extra fees for things that happen normally like someone adding a tip to the card. Maybe banks should stop telling their customers that using a checkcard is “just like cash” - when in fact it isn’t - cash is a whole lot cheaper for me to accept.

Dear Guest,

You HIT the nail on the head! Bank’s encourage customers to use their Debit because Debit/Credit Cards are the Single Most Profitabale Item the Bank Has! Above loans and Deposits.

Let me preface this by saying EVERY Processor in the US pays Interchange to the ISSUING Bank. i.e. B of A, Capitol One, Chase etc.etc. depending upon card type and how it was presented (Swiped, HandKeyed, Corporate Card)

Bank’s earn the interchange rate associated with Card Type. The current Interchange on Small Ticket (less than $20) Debit is 1.55% + 4 cents. That is what we (processors) owe the ISSUING Bank for Visa Small Ticket Debit.

The Cost to us on a $20 Transaction is $0.34 approx. The cost to you could actually range from $0.42 up to $0.64 (This is what the processor charges you, with the difference being Gross Profit to the processor) This is dependent upon your current pricing. (Pricing is based upon Risk to the processor, Volume and Average Ticket).

Long Story Short. RBS Lynk is typically 10% - 30% less expensive than other processors because we handle the ENTIRE transaction from Authorization to Settlement, cutting out the Middleman (Banks, ISO’s, Associations, etc.) and passing the savings along to you the Business Owner.

Processing is just like any other business. We have wholesale costs (Interchange and assessments owed to the Bank’s and Visa/MC), overhead (Infrastructure, Salaries, HR, etc.) and profit.

Now to answer your question:
There is no easy answer on how to explain to a customer the reason for the “20% Bump” other than to say it keeps your costs down.

Another remedy might be to place a sign at the Checkout Counter or on the Menu/Table that explains “If you are paying with a Credit/Debit Card your account will be authorized for XX% more than the check amount to allow for a Tip” or simply have the Bump set at 0% and pay the extra Interchange.

Hope this helps.


The original posted question has nothing to do with debit vs credit but with how your processor handles the transaction. My old processor said I was on a “restaurant program” that automatically “held” a 20% gratuity regardless of whether it was debit or credit…thats just how it was handled…it was a NIGHTMARE!

I use RBSLynx now and they do not process that way (at least for my account) I will say though they assured me that I would save money by accepting debit, but that is NOT the case. I figured that my average ticket had to be over $22 to see any minimal savings.

I would recommed taking CREDIT only and you can swipe debit cards as credit as long as they have a credit card logo on the front.
I am not an expert by any means, but this is what I have learned from my business.

Good Luck

Perry is correct. The “Breakeven” point on PINed debit is probaly around $25 or so depending upon the Debit Network Printed on the Back of the card.

Signature Debit Transactions less than $25 are less expensive to process than PIN Debit. (especially if you are set-up on a “cost plus” pricing program)

If you have sit down, pay at the table, service then PIN debit is probaly not an option anyway.

Perry, I suggest you Call Customer Service and/or your sales rep and ask them about switching to Cost Plus Pricing if your not already setup that way.

PS There are 2 ways to process a Debit/Check Card with a Visa or MC logo. Either through the V/MC network (Signature) or through a Debit Network (PIN - Personal Identification Number). Depending upon the size of the ticket, one way is going to be less expensive over the other.

PSS Tips aren’t allowed with PIN Debit unless you add it to the transaction prior to Authorization.


Thanks for the replies. (FYI - I’ve been on RBSLynk for a while now…)

Debit cards cause us all sorts of customer complaints. Not only with the tip issue, but also with voids in a number of ways.

A couple of examples - a customer cancels their order after they paid with a debit card. We void the auth, but of course that void doesn’t happen realtime like the auth did - and the money is held from the customers account until their bank clears non-batched transactions. Customers always think we are the cause of this. If they had used a CC, they wouldnt even notice.

Debit cards are evil, the consumer is so very uneducated about how they work and how in reality they are not the same as using cash. But like you said, the bank is making a fortune off them.

BofA even has that “Keep the Change” program to make certain people think it is a good idea to use them…lol.

That is a tough one. I have had customers call me with the same complaint. There is no easy way around it, nature of the Debit Card Beast.

And yes banks have done a Magnificent job selling Debit. Why? Again, Debit Cards are a HUGE profit machine for the Banks.

Did you know that last year Visa Debit Card transactions out numbered Visa Credit Card Transactions? I think the numbers are approx 52% Debit and 48% Credit.

I have customers that actually have 78% of their transactions coming through as Debit and some them happen to be Pizza Restaurants.

More of a reason to be set up on Cost Plus if possible.

Here is a little History lesson. Do you remember when WalMart Sued Visa and Mastercard? Visa and MC settled out of court for ALOT of money. Part of the settlement was to separate Credit Card Interchange from Debit Card Interchange. Because of this settlement a VERY Large bank LOST $600,000,000 in the last quarter of the settlement year. The problem with the settlement was the reduction in fees was not mandated to be passed down to the Merchants (the ones ultimately paying the bill).

Have you noticed an influx of Rewards Cards? Debit and Credit? This is a way for the Banks to help recoup the losses they realized. Rewards Cards have a higher interchange than “regular” credit and debit cards.

This industry is extremely complicated and confusing. It is my job to help you, the Business Owner, get a better grasp of the impossible.


Thanks for the advice…I actually am on the fixed price program ($.08) already!

All i know is that I gave debit (PIN) a chance for 3 months after I was assured “YOU WILL DEFINITELY SAVE MONEY TAKING DEBIT” only to end up paying slightly more with more aggravation. Customer service did not take into account the average ticket of a pizzeria into the equation.

Can I ask you what you think about wireless tranactions. I just added another Verifone vx610 and could not be happier. I would much rather have the driver swipe at the door as opposed to spending 5 minutes on the phone reciting numbers, dates and codes to somebody in broken english as it is ringing off the hook.

I track my effective rate for all my terminals by total charges divided by total sales and it seems to stay at approx 2-2.1% on a monthly basis.

sorry my rate is cost + $.08