Batching, closing, or
settlement for our discussion here is the same thing: the process of
transferring funds from sales and credits between Acquirers and Issuers,
including the final debiting of a cardholder’s account and crediting a seller’s
account.
Why is this important?
First per the terms and condition every merchant signs, and is required
by Visa, MasterCard, Discover, and American Express you agree to settle
transactions within 24 hours. The second
reason a business should close every day, should there be transactions; it
starts the funding process to the business bank account. If a transaction is over 24 hours and is not
settled, the transaction can down grade to a higher cost of interchange category. It can also increase you
chance of a charge back. Last and
perhaps the most important, with the debit cards you are most likely running,
if you delay your settlement, it can throw the bank account in a negative for
those individuals that may not keep good track of their prior purchases. For example let’s say on a Monday Bob
purchases something at your business with his debit card. When the transaction is approved you are
issued an authorization.
This “earmarks” the amount of purchase on Bob’s bank account and holds
this amount waiting for your settlement.
If you do not settle the transaction after around two to three days the
hold drops off. Later you settle the
transaction the funds are then taken from Bob’s account. Perhaps Bob forgot about the purchase he made
at your store on Monday and thought he had more funds but because of your delay
it throws his account in the negative.
For your sake and your customers’ . . . settle
daily.
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