Credit Card Processing – Do You Need ID?

When it comes to the rules and regulations governing credit card processing, it is not uncommon for both merchants and consumers to be in the dark.  For example, many merchants impose restrictions or apply special rules to consumers using credit cards, despite the fact they may be in violation of their merchant agreement.  Consumers often follow along with whatever is asked of them because they do not necessarily understand the credit card processing system or their own rights as account holders.  It is important for both parties to understand their rights and responsibilities when it comes to credit card transactions.  Here we look at one rule that this often misunderstood by participants on both sides of the fence.

Valid ID Not Required When Making Credit Card Purchase

It is important for credit card users to understand that they do not have to present a valid ID for credit card processing to take place.  Consumers are often under the false impression that by presenting their ID, it somehow adds protection against the fraudulent use of their credit card.  In reality, this protection is already provided by the issuer of the credit card.  While the law limits your responsibility to only $50 of unauthorized charges, many major credit cards offer total protection in the event your card is used fraudulently.  This means you, the consumer already have protection against fraud, so why then would the merchant be requesting a valid ID?

Reasons Why A Merchant May Ask For ID

There are a few exceptions which allow a merchant to ask for an ID before finalizing a credit card transaction, but for most normal sales activity, this is prohibited.  Nevertheless, some merchants, either unaware of the rule or working against it will ask to see ID.  In most cases this will be to ensure they are not accepting payment from an unauthorized user or a stolen credit card.  Other reasons, with are permitted, include verifying the age of the consumer if age restricted products like alcohol, tobacco or certain medications are involved.  Merchants can however protect themselves from processing a fraudulent transaction not by requesting ID but rather carefully inspecting the card to ensure it hasn’t been tampered with and comparing signatures on the receipt and the back of the credit card.  If the signatures do not match or the consumer has not signed the card, merchants are not required to complete the credit card transaction.

The Importance Of Understanding The Rules

Both consumers and merchants must make the effort to understand the rules governing credit card use to ensure their rights are protected.  The credit card companies and credit card processors are all part of a system that only works if all parties adhere to the rules set forth.  If a business violates their merchant account agreement, they risk losing the right to process credit cards all together.  When consumers are unaware of their rights and responsibilities they are also exposed to negative consequences.  An understanding of how the credit card processing system works and the rules which account holders and merchants must adhere to ensure everyone gets what they want out of the transaction.

Photo via Cormac Phelan

Posted on Wednesday, October 13th, 2010