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Payment Authorisation Hold (Credit Card Authorization Hold)

Payment authorization hold (also known as a credit card authorization hold ) is the hold of funds on the client’s account until the transaction is manually approved by a merchant. The payment authorization hold is a tool merchants use to prevents chargebacks and fraud.

How does the credit card authorization work?

Let’s see how the credit card authorization works:

  1. The client enters the merchant’s website and adds a product to a shopping cart.  
  2. The client enters the payment page, enters his credit card details, and presses the BUY button. 
  3. The funds (the purchase amount) are not withdrawn. They are frozen for x days.*
  4. The merchant has x days to get in touch with the clients. It is to ensure that he/she agrees for all the purchase conditions. 
  5. If everything goes right, the amount is charged within x days. 
  6. If something goes wrong, a merchant simply declines the transaction. 

*We say x days as a merchant himself chooses the hold period. It can be for three days, five days, or even a week. 

The key benefit of credit card authorization hold is that even if a merchant declines the transaction, payment processing networks, and banks don’t see it as a chargeback. That protects the merchant’s processing history and overall business reputation.

Keep in mind the following: the client loses his access to the frozen funds. Simply put, he can’t use this money to pay for other purchases. 

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