Placing an authorization hold on a credit card transaction is a smart, safe, and easy way to reduce costs and prevent unnecessary hassles, like having to reauthorize a transaction or provide a refund. They can also protect you from fraud and help prevent chargebacks, too.<\/p>\n\n\n\n
The use of authorization holds is a standard procedure within some industries. However, nearly all merchants who accept credit cards can benefit from this helpful tool. Let's take a look at what a hold is, how it works, and why you should consider using it.<\/p>\n\n\n
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An authorization hold is a temporary hold placed on a portion of the funds or available credit in a cardholder\u2019s account. This is usually done because the final total of a transaction is unknown at the time authorization is requested, such as at hotels or gas pumps.<\/p><\/dd><\/div><\/dl>\n\n\n\n
Authorization is the bank\u2019s way of saying that the customer has the funds or credit available for the purchase. You will eventually get the funds if the authorization request is approved. However, this will only happen after the transaction is settled.<\/p>\n\n\n\n
Let's say you operate a gas station, though. Your customer swipes a credit card before pumping their gas, which means you have to seek authorization before you learn the total cost of the transaction. This is where authorization holds come in.<\/p>\n\n\n\n
As a merchant, you can use an authorization hold (sometimes known as a \u201cpre-authorization\u201d or \u201cpre-auth\u201d) to ensure you actually get paid for purchases made via credit or debit card. A hold locks in the funds you're owed due to a payment card transaction until that transaction is settled and the bank transfers the funds to the merchant\u2019s bank.<\/p>\n\n\n\n