Pre-authorization is one of the ways to process bank cards.
The pre-authorization of a bank card is a temporary deduction of funds and reserve them for a subsequent transaction. Depending on your seller, this may take up to 5 days.
During this period, funds are not available for the client. The client will not be able to use this amount anywhere else. However, the money from the client’s card was not debited but simply reserved.
Customers often encounter this type when booking something, such as hotels. The hotel sends a request to the bank for pre-authorization to confirm the solvency of the client at the time of booking. In this case, the money is not debited from the client’s card but simply frozen for a certain period, for example, until the end of the settlement. During this period, the client cannot use this money on the card, while they remain in his account.
Depending on the further situation, the money may be debited from the card or thawed. Typically, the payment processing process is highly dependent on the company that provides the reservation services themselves.
Advantages of a pre-authorization
- Pre-authorization is an effective way to prevent chargebacks.
- Increasing customer loyalty. There are times when it is necessary to cancel an order. In this case, if the client made a payment, you will encounter a chargeback. With pre-authorization, you can avoid chargebacks and the client will be satisfied.
- You don’t need to pay MDR fees beforehand.