Authorization
Also known as: Auth
The issuing bank's approval that holds funds for a pending transaction.
Authorization is the first step of a card payment: the issuing bank confirms the card is valid and the funds are available, then places a hold. No money moves yet; that happens at capture and settlement. An authorization can be voided before it's captured.
How it works
Your terminal or gateway sends the authorization request to your processor, which passes it to the card network, which routes it to the issuing bank. The issuer looks at the available balance and runs its own fraud rules against whatever you sent, including any AVS and CVV data. It answers in a second or two, with either an approval code or a decline code. An approval reduces the cardholder's available balance. It does not debit the account.
The hold is what generates support tickets. A customer sees a pending line on their banking app for an order you have not shipped, and assumes they have been charged twice. That gets worse when a failed attempt and a successful one have both left holds sitting there. You can void the stale authorization, but the issuer decides how fast the pending line disappears, and that can take several days. One sentence on your order confirmation prevents most of those calls.
Authorization rate is a cost line most merchants never look at. Every decline is a sale you have already paid to acquire, and approval rates do differ between processors, depending on how much data they pass to the issuer and whether they retry soft declines sensibly. Some gateways also bill a small fee on every authorization attempt, declines included, so a checkout that keeps retrying a failing card adds fees without adding revenue. Ask any provider you are quoting for its approval rate.
Worked example
A customer orders a $180 chair on Tuesday. Your gateway asks for authorization, the issuer approves, and $180 of their available balance goes on hold. Nothing has left the account. You ship on Thursday and capture the $180 then. If the chair had been out of stock you would have voided the authorization instead, and the hold would have fallen away. Leave an authorization uncaptured and it expires by itself, usually within a few days.
Frequently asked questions
- How long does a credit card authorization hold last?
- A few days for most sales, often around a week, and then the issuer releases the held funds without anyone asking it to. The window varies by card network and by merchant category: hotels, car rental firms and fuel stations get longer ones because nobody knows the final amount when the card is first authorized. If you already know you will not capture, void the transaction and the hold clears sooner.
- Why do card authorizations get declined?
- Most of them come from the issuing bank rather than your processor. Insufficient funds will do it, so will an expired or blocked card, a fraud rule tripped by the amount or the country, or too many attempts in a short period. AVS and CVV mismatches account for more. Read the response code, because it tells you which. Soft declines are worth retrying and hard declines are not.
- Can I charge more than the amount I authorized?
- Not without a second authorization, or an incremental one on top of the first. Capturing above the approved amount invites a decline or a dispute, so if the total climbs through shipping or added items, most processors want the higher figure authorized up front. Restaurants are the usual exception. Network rules there allow a tolerance for tips added after the card has been authorized.