Not all cards are created equal – Verifying Address and Card Codes - By Avi Jorisch

Certain credit cards cost more to process than others. It's up to you to choose what works best for your business. To help offset the cost of processing more expensive card types, ensure that your transactions meet as many of the qualifying requirements as possible.

While it is not always possible, encourage your clients to give you the card that carries the lowest interchange rate. The following rules of thumb apply:

·       Actually swiping a card through a magnetic reader offers the lowest interchange rate possible

·       Of all cards, debit cards carry the lowest interchange rate

Whenever you can not get a magnetic stripe read, be it a problem with the reader at the store or because it is a transaction on the internet, you should run AVS and CVV checks on the transaction. Address Verification Service (AVS) is a simple check that compares information presented by the cardholder with information on the billing account for the card. The Card Verification Value code, is the three or four digit code on the back of the card. Carrying out an AVS or CVV check is important both for getting the lowest interchange rate, but also to ensure the credit card you are taking is good.

Each issuing bank supports different levels of verification. The most widely accepted and supported level of verification is the zip code. If the person presenting the card to you can not identify the zip code for that card, you need to further scrutinize the transaction. When you send an authorization request with AVS verification the Issuing Bank will return two separate responses back. One response will be whether the dollar value of the transaction is approved and the other is whether the AVS information supplied for verification matched with the information the Issuing Bank has on file for that cardholder.

The Card Verification Value check is a 3 or 4 digit number that is printed on the physical card and stored nowhere else except at the Issuing Bank for that card. Cardholder verification processes are similar to Address Verification. The CVV value is passed to the Issuing Bank along with the regular authorization.

The Issuing Bank will respond with two responses:

One possible response is for the dollar amount to be authorized.  The second response might be to identify whether the CVV provided matches the card. You should ask the customer for the number on the card. If you do not get a match on the number during the authorization, you may not want to accept that card for payment. This “security” number exists on the card and in the computer system of the Issuing Bank for that card. This number is never to be recorded anywhere for any reason by anyone, doing so would break down the security of the number.

Proper procedures and checks allow you as the merchant to get the lowest possible interchange rate, in addition to reducing instances fraud and chargebacks.