Visa Changing Chargebacks

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Visa Changing Chargebacks

NEW YORK -- A new Visa chargeback policy going into effect this week might provide some relief for retailers being forced to pay for chargebacks on entire purchases.

On April 14, banks will be held responsible for any purchase amount more than $50, rather than the whole amount of the purchase, according to Visa spokesperson Rhonda Bentz, who noted the change was a response to gas merchants' concerns over rising prices in an interview with the Arkansas Democrat-Gazette.

Retailers' current solutions to prevent large amounts of loss when forced to pay for chargebacks included shutting off the pumps once the purchase amount reached the credit cards' limit -- $50 with Visa and $75 for MasterCard.

"It creates a situation where a retailer has to make … a choice between two equally unappealing choices: Either restrict the customer's ability to fill up and shut off the pumps at a certain limit, or allow the pumps to continue to fuel but risk not getting paid for the transaction," Jeff Lenard, spokesperson for the National Association of Convenience Stores, told the paper.

However, the company set up the system to prevent fraud.

"It's to protect both merchants and cardholders because as the transaction amount goes up, so does fraud," Bentz told the paper. "So we're focused on reducing fraud within the system, as well as defending merchants and cardholders from becoming victims of fraud. That's where we fit into all of this."

When a customer uses a Visa credit card at gas pumps, a computer ensures that there is at least $1 available for credit. By setting the spending limit, a fraudulent transaction or if the customer exceeds the credit limit, the result is no more than $50.

According to Visa, 95 percent of the card company's gas transactions are less than $50, with the average purchase at $29. In addition, only a small section of the remaining 5 percent actually end up as chargebacks.
However, there are some ways to circumvent the protections. If the pump shuts off, customers can go inside the store and ask employees to authorize another transaction on the card and resume pumping gas. There are no pump limits for transactions that begin inside the store, the report stated.

Not all gas retailers follow the limits. San Ramon, Calif.-based Chevron Corp. allows customers at the pumps to exceed Visa and MasterCard credit card limits, according to Casey Callaway, a spokesperson for the company. Chevron suffers the losses but adheres to Wright Express, Voyager, Discover and American Express pump-limit guidelines, Callaway told the paper via e-mail.

The company exceeds Visa and Mastercard limits "in order to satisfy customer requirements and meet market conditions," Callaway said, adding that chargebacks from Visa occur daily, and each time Visa withholds all of the funds involved in the transaction.

The dispute is between the issuer and the bank, according to Joanne Trout, spokesperson for MasterCard. "The cardholder and the merchant are only indirectly involved," she told the Democrat-Gazette. "It is up to the [bank] if they want to pass the liability down to the merchant."

That puts stores in a lose-lose situation, Lenard said.

"If you stop the pumps, it gives [customers] one more reason to come inside and scream at you, and that's certainly the last thing you want to see when they're already frustrated," Lenard said.