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Below are answers to a few common questions about credit
cards and how they work.
Questions:
Why does my credit card account show single or multiple charges
when my card didn’t go through or was declined?
The place I used my credit card says they didn’t charge it nor
do they have an authorization but my credit card bank/company
shows a charge. Who is telling the truth?
I used my credit card for an online purchase and they charged my
card so many times that I have reached my limit but they deny
it. What can I do?
I used my credit card online and my card wouldn’t work because
of AVS (address verification service) errors. My bank tells me
there are authorizations and the online store says they have no
authorizations. Who is right?
Answer:
Every credit card issuing bank has a set of rules that
determines how long they put a hold on your funds for different
situations. Unfortunately this varies depending on the bank. It
has nothing to do with the online store where you used your
card.
Once you enter your credit card information the online store
passes it securely to their credit card processer. The processor
then passes some of the information to your bank. If the card
number is good and funds are available a pre-authorization
occurs by your bank. The credit card processor gets the response
and performs other checks based on the online store’s settings.
If the card information passes these checks an authorization for
the funds is obtained and passed to the online store. If any
check fails the online store is NOT issued an authorization,
however, your bank will place a hold on your funds because of
their pre-authorization. The length of this hold is usually 1-2
days but it can be up to 14 days depending on their policy. The online store
does not have an authorization so they can’t charge your card in
these cases nor can they cancel an authorization (they don’t
have one to cancel). A typical authorization will place a hold
on funds for 30 days.
With online fraud becoming more and more prevalent online stores
use these checks to help ensure your credit card use is
legitimate. The most common of these checks are AVS and checking
your CVC (security code). If you fail an AVS or CVC check
multiple times then there are multiple pre-authorizations. Many
times these pre-authorizations will appear to be actual charges
on your account until they expire. This can result with angry customers calling
the online store. The agent at the online store will assure the
customer there are no changes or authorizations. The customer
feels like they are getting the run around. To confuse things
even more sometimes when the customer calls their credit card
bank the agent will tell them there is an authorization (when
there is actually a pre-authorization) and they should call the
online store to have it removed. In most situations the online
store agent can’t do anything about it. The best thing to do is
wait a few days and it usually goes away. Credit card banks
should do a better job of explaining this.
Question:
When I used my credit card the online store said my card was
declined when in fact the card failed because I mistyped my
address resulting in an AVS (address verification service)
error. Why didn’t the online store just tell me to check my
address?
Answer:
The answer is simply because of credit card thieves and identity
theft. Credit card thieves look for online stores that provide
AVS error feedback so they can test their stolen credit cards.
They can enter their stolen credit card number with an incorrect
address and if they get an AVS error they know the card is good
and hasn’t been reported stolen yet. If they get a decline they
know the card theft has been reported so they discard it. The
thief will test hundreds of cards and each time the online store
is charged a fee for the authorization attempt.
Question:
I’m going to Europe can I use my credit card while overseas and
are there extra charges or fees?
Answer:
Yes, you can use your card but plan ahead and choose the right
card! It’s always a good
idea to call your credit card bank and let them know when and
where you plan to travel so their fraud prevention department
doesn’t put a hold on your card while you’re gone due to
suspicious charges. Just as
important you should review your credit card agreement or call
your bank to understand any foreign transaction fees or currency
conversion fees they charge for purchases made outside the
United States. Depending on the bank these can be significant
and an unpleasant surprise when you get your bill. After
reviewing the agreements use the card that charges the least
amount in fees while you are in Europe or better yet get a new
card that has even fewer fees.
More on credit card fees on foreign transactions: Visa and
Master Card both charge a 1 percent foreign transaction fee for
converting the currency. American Express charges 2.7 percent on
most of their cards. Many credit card banks add their own fees
on top of these fees just because they can. For example at the
time of writing Bank of America adds 2 percent fee to the 1
percent fee Master Card charges for a total of 3 percent while on
the other end of the spectrum Capital One doesn’t add any
additional fees to the 1 percent fee that Visa charges. Saving 2
percent can add up so check your credit card’s fees before you
leave the country. Make sure you also check ATM fees before you
leave.
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