The Danger of Using Debit Card for E-Commerce Transactions!

Hopefully the headline caught your attention.  There seems to be a lack of understanding of how Debit Card transactions work in regards to E-commerce websites.  Our intent here is to educate.  This is a long read, but honestly should be read by those using their debit card in todays e-commerce environment.

So lets set the stage.  Big Johnny goes onto the EI website to purchase his dream part.  His $1000 transaction in his cart is ready to go.  He is shipping his transaction to Shade Tree services down the road.  He has seen the EI notices that the BILLING Address MUST match the Billing Address on file with the credit card.  He's got good credit and he knows the guys at EI..........that doesn't apply to him!

"Checkout" - When you hit the checkout button a number of things happen.

First lets discuss some myths.  Your credit card company DOES NOT DECLINE transactions based upon the security code, address verification, or the name.   (in fact the name is not even sent to them.)  They look at 2 pieces of information that we supply:  Credit Card Number and Expiration Date.  That is it.  Based upon those two pieces of information (and their internal profiles of you) they will authorize or decline.

At the same time we have submitted your card number and expiration, we have also submitted your CCV (Card Security Code), and Billing Street Address, and Billing Zipcode.  The Credit Card company will return responses to our webstore on whether or not these three pieces of additional information match.

So here is the rub......Your credit card company (bank) will authorize the transaction, at the same time responding back that the address or security code is NOT valid.  In that case they Authorize the card, and our webstore declines the transaction due to the address mis-match.

So lets get back to Big Johnny.  The first time he hit the checkout button it told him that his transaction was declined.  His bank authorized the card, but he thinks he might have put in the wrong card security code.  So lets give it another shot and he hits submit again.   Declined.  "Oh well, the EI guys must really mean the billing address must match and let me change it to my card."  "Checkout"...bingo....Success.  It was that billing address.

So that afternoon when Big Johny's wife, Bountiful Betty, goes to the grocery store and uses her card, it is declined.  What is this..........Upon Logging into their bank account they see that $3000 has come out of their account!  Oh no.........the frantic calls to EI begin.

So here is what really happened behind the scenes:

#1 - $1000 Authorization Approved, EI Website Declined due to Security Code mismatch, and Billing Address mismatch.

#2 - $1000 Authorization Approved, EI Website Declined due to Billing Address mismatch.

#3 - $1000 Authorization Approved, EI Website Accepted.

Every merchant has a "settlement" time each day.  At that settlement all credit card "Captures" and "declines" are submitted to the credit card companies.  From the credit card companies those declines have to make it back to the card holders bank, who then needs to release those authorizations from the debit card.

We are currently seeing this process take up to 48-72 hours for US Domestic accounts and 7-10 days on some International cards.  There is absolutely nothing EI can do to speed up this process.  We did not receive those funds for the declined transactions, they are simply sitting at your bank waiting for the authorization to be voided.