Asking for Identification for a Credit Card Sale: Should You Do It?

We’ve fielded a lot of questions from our merchants recently about the rules and regulations surrounding asking for identification when a customer attempts to pay with a credit card. We’ve heard from merchants who always ask for identification as a protection against fraud and from those who are uncomfortable with the practice because it feels like an invasion of privacy. Let’s break down why and how you might want to ask for identification on a credit card purchase.

What are the Rules?

All the major card networks allow merchants to ask for identification whenever a credit card is presented. However, if the card is signed on the back you are not allowed to refuse service to the customer if they refuse to produce an ID, at least when it comes to Visa and Mastercard. The rules do a 180 if the card is unsigned. You are required to ask the customer to sign the card in your presence and present a valid ID. Discover and American Express have policies that are more vague, asking merchants to make a judgement call in a given situation (Discover) or simply ensure that the customer is actually a card member (American Express) before making the sale. There are even some state laws that regulate the practice. Texas, for example, enacted a law in January that enabled merchants to refuse service to a customer who won’t produce an ID. Other states prohibit merchants from writing down or otherwise recording the customer’s ID information. The bottom line? Be familiar with the rules in your state as well as the provisions of your card acceptance agreements.

Better Safe Than Sorry?

Figuring out and enforcing the rules for credit card identification isn’t always the easiest to do. Business owners may set their own policies, unaware that they may be running afoul of their card acceptance agreements. Sometimes even a well-meaning cashier will go against store policy and ask for identification, usually to be on the safe side and avoid a chargeback – and with good reason. If the customer does report the card as stolen and the merchant didn’t ask to see identification, there is a very good chance the merchant will lose that chargeback. On the other hand, asking for ID on every transaction is cumbersome and could annoy customers, plus security advancements like EMV and mobile payment technology give merchants extra layers of protection and render asking for ID somewhat redundant and unnecessary.

What About Privacy Concerns?

Many shoppers won’t bat an eye when you ask to see their identification – but some most certainly will. In general, consumers who balk at producing ID are concerned about the information being recorded and misused by an employee at a later date. When you think about it, it’s not the craziest concern someone’s ever had. Your ID generally has your name, date of birth, address, and other information, and your credit card of course has your credit card number on it – not to mention the expiration date and the CVV code. Taken together, this is a treasure trove of information for a would-be fraudster. Several states have placed restrictions on the type of information a merchant can request from a consumer – most notably California with the passage of the Song-Beverly Act in 1971. This law restricts the kinds of personal information businesses can record about their customers – and a challenge to the law listed information as mundane as zip codes on the prohibited list.

So What am I Supposed to Do?

In general, asking to see identification when processing a credit card transaction is a good idea. However, you’ll also have to use your best judgement and be familiar with your card acceptance agreement and applicable local laws. Your credit card processor should be able to help you decide on the course of action that’s best for you – and if they can’t, it’s time to reach out to 360 Payments. Give us a call or drop us a line on our website. We’d love to show you why we’re a different kind of credit card processor.

PS – Here are our picks for the best business credit cards in 2018.

PPS – What’s the difference between surcharging and cash discounting? We’ve got the scoop.