Cash Back on Debit Card Transactions: What You Need to Know

Sydney VaccaroIndustry TermsLeave a Comment

Cash Back on Debit Card Transactions_ What You Need to Know
Debit card cash back is when a merchants offers the cardholder to add an amount to their transaction and to receive it in cash. This practice is normally popular with grocery and c-store merchants along with some retailers. Merchants that do offer this service benefit in a couple of ways.

Giving customers the ability to receive cash with a purchase on a debit card can help merchants gain loyalty, improve customer experience, and even save money. Here is what merchants need to know about allowing customers to receive cash back on transactions.

Cash Back Processes for Merchants

Debit card cash back is when a merchants offers the cardholder to add an amount to their transaction and to receive it in cash. This practice is normally popular with grocery and c-store merchants along with some retailers. Merchants that do offer this service benefit in a couple of ways:

  • Offering this service improves the customer experience and in turn creates customer loyalty. A merchant could be saving a cardholder from going to the bank which saves them time and effort.
  • It may increase sales. Stopping by a local grocery or convenience store may be much easier or more convenient than making a trip to the bank. So a cardholder specifically makes a stop just to buy a small item they need and get cash back as well. Or if they were trying to track down an ATM machine it is feels better to buy a small item or snack at the store rather than pay a fee to get cash.
  • The initial reason that the British merchant Tesco started this offering was to reduce the amount of cash the store needed to take to the bank. So it benefits employees when they need to close or count the tills as well as saving trips to the bank.

Visa rules and regulations for allowing cash back with a purchase include:

“The cash back amount must be uniquely identified in the authorization and clearing messages from the total transaction amount.

Authorization messages contain:

  • Total transaction amount (purchase plus cash back) in Amount, Transaction (V.I.P. Field 4).
  • Cash back amount in Other Amounts (V.I.P. Field 61.1).

Devices supporting cash back must be configured to meet all of Visa’s cash back requirements including local requirements (where applicable).

Devices must be able to:

  • Enable cash back functionality (for chip devices, this includes switching on the cash back functionality setting in the EMV kernel)
  • Capture cash back amount and populate it in the authorization message

The device must be able to give the merchant the capability to key in purchase and cash back amounts separately (the authorization amount is for the total amount which is the purchase amount plus the cash back amount). An end-of-day batch from terminals must identify cash back amounts so merchants can reconcile with their cash drawers.

Devices must be able to handle special conditions relating to cash back such as:

  • A response from the issuer that the cash back service is not available to the cardholder.
  • A response that the cash back amount is more than the maximum cash back amount agreed for the country. (In this case, the merchant could retry the transaction for a smaller cash back amount or for the purchase amount only.)
  • A response that the cash back amount is equal to the total transaction amount. (This is not allowed.)

Certain special conditions will require different actions by the merchant. Merchants may need to work with their acquirers to determine appropriate point-of-service procedures.”

Fraud on Cash Back Debit Card Transactions?

While there are some requirements on the merchant’s end that need to be put in place before you can start offering cash back to the customers, you may be wondering if there are risks or fraud involved with offering this service to cardholders. The fraudulent acceptance of credit cards can turn into a dispute for merchants. This is because merchants are liable to prevent the acceptance of fraudulent purchases. So, if a fraudster gets a hold of a debit card and makes a purchase of a $3 bag of chips and $100 in cash back, could this turn into over a hundred dollars in fraud loss?

Luckily for merchants, cardholders can not dispute the cash back portion of the transaction. This means that if the cardholder disputed the $3 bag of chips and $100 cash back that the merchant would only be liable for the $3 bag of chips.

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