PRE AUTH Transactions
what is pre-authorization?
Pre-authorization is the first step in the payment process, where the merchant requests approval from the card issuer to ensure that the customer has sufficient funds or credit available for the transaction. This involves temporarily placing a hold on the customer's account for the pre-authorized amount without immediate fund transfer to the merchant. The pre-authorization hold serves as a temporary reservation of funds and remains active for a specified period, after which it will expire if the transaction is not completed.
Payments that have been pre-authorized must be processed within 7 days; otherwise, the held amount will be released.
Business Scenarios
Common business scenarios for pre-authorization transactions include:
- Hotel reservations: Pre-authorizing a guest's credit card for the room rate and potential additional charges before check-in.
- Car rentals: Pre-authorizing a customer's credit card for the estimated rental cost and any potential damages.
- Online purchases: Pre-authorizing a customer's card for the purchase amount before shipping the goods.
- Subscription services: Pre-authorizing recurring payments for subscription services to ensure continuity of service.
- Travel bookings: Pre-authorizing payments for flights, hotels, and other travel-related services to secure reservations.
- Retail stores: Pre-authorizing payments for high-value items or during peak shopping seasons to manage inventory and prevent fraud.