Authorization Hold

Authorization Hold is a temporary hold placed on a portion of a cardholder’s credit or debit limit during a transaction’s authorization process. It is used to verify that the account is valid and has sufficient funds to cover a pending transaction, without actually debiting the cardholder’s account upfront. This practice is common in industries such as hospitality, car rentals, and online retail where the final transaction amount may not be known immediately.

When a customer makes a purchase, the merchant initiates an authorization hold to ensure that the cardholder has sufficient credit or funds to cover the potential transaction. The held amount is temporarily subtracted from the available credit or balance but is not immediately transferred to the merchant. Once the final transaction amount is determined, the authorization hold is replaced by the actual charge. Authorization holds provide a way for merchants to secure payment, reduce the risk of declined transactions, and manage potential fraud.

Recommended articles:

Credit Card Authorization Holds: A Guide to Understanding Their Importance