This article is part of a larger series on Payments.
A credit card authorization form is a formal document that a customer signs to approve a charge to their credit card. Merchants use credit card authorization forms as documented proof to validate credit card transactions. Essentially, it states that the cardholder agrees to the charges set forth by the merchant. Credit card authorization forms are often used for recurring payments and card-not-present (CNP) transactions.
A free credit card authorization form template, which can help your business combat fraud or chargebacks, is included below. You can download and customize it according to your needs.
What to Include in a Credit Card Authorization Form
The information being asked for on credit card authorization forms is more or less the same, but not all information is mandatory. Some include optional fields specific to the product or service. More information offers businesses more security and validation, but bear in mind how collecting this information may impact the customer experience. While someone buying a car may be willing to provide all of this information, it may be overkill for a smaller purchase.
Mandatory Credit Card Authorization Information
Optional Credit Card Authorization Information
When You Need a Credit Card Authorization Form
A credit card authorization form essentially keeps a card on file, so you can process transactions without requiring customer permission every time. You can use credit card authorization forms in hard copy or digitally. For in-person transactions, such as someone signing up for a membership at a gym or health club, it’s a good idea to have several hard copies available.
For transactions that don’t happen in person, you can mail a physical copy or email a digital copy of the credit card authorization form, so the customer can fill it out and send it back on their own time. They can print it out and sign or sign digitally with a tool like DocuSign or HelloSign.
Now, small business technology is becoming advanced to the point where you can offer digital credit card authorization forms in person too. If you have tablets set up at your place of business, customers can fill out the forms easily that way.
Credit card authorization forms come in handy in a few key scenarios.
Recurring payments are required for subscription-based businesses, memberships, and things like utilities and bills. In a recurring payment business model, customers have to make regular payments to businesses. However, this means they have to remember to make those payments.
When you have a credit card authorization form, you can use language that permits you to charge the customer’s card without requiring their permission each time. Usually, some form of automation is involved through your point-of-sale (POS), invoicing, or payment software, and this helps ensure you receive the payments on time.
CNP transactions happen when the physical credit card and the cardholder aren’t there at the time and place of the transaction. As such, these transactions are more susceptible to fraud. This is important because businesses around the world lost $28.58 billion to fraud in 2020.
A credit card authorization form serves as an extra form of proof for CNP transactions. So, in the case you do fight fraud or chargeback, you have proof of authorization to help make your case.
Business-to-business (B2B) payments are typically a little different than business-to-consumer (B2C) transactions. Payment preferences vary, and more businesses opt for “traditional” payment methods. Although paper checks and ACH deposits are more popular, they’re declining and losing ground to credit cards.
Credit card authorization forms are especially handy for B2B payments. A few use cases include:
- Pre-authorization for company lunches, so anyone can place an order and/or pick it up for the team
- Bills sent via mail, such as electric, internet, or business insurance
- Software-as-a-service (SaaS) subscriptions
Chargebacks happen when your business charges a credit card and the cardholder tells their issuing bank that the charge was not authorized and should therefore be refunded.
It’s in every business’s best interest to avoid chargebacks. They cost an average of $240 for every $100 in chargebacks, for starters. If you get too many, your business accounts and financial reputation could be at stake. You could get removed from your merchant account and hurt your chance at future loan approvals.
When you use a credit card authorization form, just like in the case of fraud for CNP transactions, it helps validate the legitimacy of the charge. This means that you’re more likely to win the case and keep the money—unfortunately, however, there’s no way to get your time back. A credit card authorization form may also deter customers from pursuing chargebacks in the first place.
How to Store Credit Card Authorization Forms Properly
Every business that accepts noncash transactions are expected to observe Payment Card Industry Data Security Standard (PCI DSS) compliance standards to avoid liability in case of data breach. This includes policies on how to store and manage credit card authorization forms. Note that payment processors and merchant account providers expect businesses to remain PCI-compliant or be assessed for noncompliance fees that start at $19.95 per month.
Here are the PCI guidelines for storing credit card authorization forms:
- Do not keep a record of your customers card verification value (CVV) or CVV2. This means you cannot ask for this information on your payment authorization form, or store this information anywhere―on paper or digital―after getting authorization from the customer.
- Store completed authorization forms in a secure and restricted area, such as a safe room or filing cabinet. Files should be secured with a lock regardless of where or how it is saved.
- Only authorized persons whose job descriptions require use of these completed forms should be allowed to access these records. Make sure to keep a physical log with a detailed record of personnel who go in and out of the secured storage.
- Your emails and even the PDF file itself should always be encrypted or password protected (when possible) before sending out a copy to your customer or relevant financial institution. Use a secure file transfer application if you have a client portal.
- Do not keep canceled authorization forms for more than three months in anticipation of possible chargebacks.
A credit card authorization form might sound unnecessary, but it can come in handy when fighting fraud and chargebacks. This simple step can be the difference between a won or lost chargeback dispute.