Understanding How Batch Processing Works
August 25 2017 |
When you process a sale at your place of business, a transaction goes through a few stages before hitting your bank. In order for a sale to become a deposit in your bank account, you need to close the batch on your terminal first. The sale will remain in a form of an approved authorization in your POS terminal until you cash out. In other words, until you settle the batch.
Every time you process a credit card sale, a transaction gets assigned to a specific category with a corresponding rate. In order to get a lower rate, the transaction needs to meet certain requirements. For example, a simple consumer card transaction with no reward program, processed via a chip reader and settled within 24 hours, will most probably end up in a lower rate category. If the transaction meets all other requirements, but is not settled within 24 hours, it will be downgraded and you will pay a higher rate. This is an industry standard and it has to do with the fact that the longer an authorization code sits in an open batch, the higher the risk.
Another important reason to settle the batch on a daily basis is the authorization code expiry. MasterCard authorizations expire every 7 days, so if a batch is not settled by then, the authorization code sitting in your terminal in the open batch is no longer valid. If you manage to settle the batch with expired authorization codes, cardholders will be able to win the case should any decide to file a chargeback with the issuing bank.
Our terminals have the option to settle the batch automatically. We strongly recommend you use this function on your POS device to avoid downgrades and other issues.