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What are Split Tender Transactions?

One of the main challenges that prepaid card providers face, specifically those who issue network branded prepaid cards like Visa® or MasterCard®, is dealing with declines due to split tender issues. Split tender (also referred to as split transactions or sales) occurs when a customer is attempting to pay with two payment types. Typically the two forms of payments are a combination of prepaid or gift card along with cash or their own personal credit or debit card. For instance if I have a $75 MasterCard gift card but my purchase total is $100, I would want to use the gift card and pay the additional $25 in cash.

Usually when a split transaction attempt is declined by the merchant, the consumer immediately thinks it’s a problem with their prepaid card. Inevitably this leads to the customer paying for the whole transaction with their credit card or cash and calling the prepaid card provider to report a problem.

But the fact is that these declines are rarely due to an issue with the card and more likely caused by another factor on the merchants end. Some of the common reasons split sales transactions decline include:

  1. Outdated Point-of-Sale (POS) System: There are thousands of POS devices being used and little-to-no standardization between each unique system. On top of that, many merchants don’t keep the software for their POS updated because upgrades cost money. As a result, some merchant’s transaction systems are not set up to recognize the amount on a prepaid card automatically and to request a second form of payment. Many of the Big Box retailers like Target, on the other hand, utilize the latest and greatest payment systems so not only are split tender payments a non-issue, but they can also print your Visa card’s remaining balance on the receipt.
  2. Lack of Cashier Training: When a merchant’s POS system is not configured to automatically handle split transactions, the merchant can still typically run the sale as two separate transactions. However not all cashiers are trained to do this. In an effort to get on with their day, they just say the card was declined and they don’t know why. To avoid this, we always inform our cardholders to tell the cashier how much they have on their card and to ONLY run the card for that amount. If the attendant is not familiar with how to split up the transaction, they should be compelled to get a manager for assistance.
  3. Online Shopping: I wrote a post in mid-June about using Visa gift cards online and the challenges consumers face. To summarize, few merchants allow for two forms of payment for e-commerce transactions. The exception is if you are using the merchant’s own gift cards with your debit or credit card. This issue is completely under the control of each business and we assume that they don’t allow for split payments because it may add to the complexity of their shopping cart process and/or possibly increase their fraud exposure. There are a few digital wallet solutions on the horizon including Visa’s V.me and MasterCard’s PayPass Wallet that we believe may solve the issue with online split tender transactions for those merchants who implement their service.

Split tender transactions can be frustrating for all parties involved but they are becoming less and less of a challenge. Since we started offering Visa Prepaid Cards in 2004, there have been vast improvements in the POS technology, and both consumers and retailer’s knowledge of prepaid cards continues to grow.

The difficulty with processing split sales should be a thing of the past within the next few years. Over the past year, both Visa and MasterCard announced that they are implementing new standards and incentives for merchants to accept EMV credit and debit cards by October 2015. Although the goal of this initiative is to reduce the fraud associated with magnetic stripe cards, a positive side effect is that it will give merchants the motivation to update their Point-of-Sale technology which is a plus for prepaid issuers.

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