How to Preauthorize a Credit Card

Did you know that up to 90% of hotel and car rental businesses use preauthorization holds? This is to make sure the customer’s payment method is good. To “Preauthorize Credit Card” means holding funds without actually charging the card. This is common in places where you don’t know the total cost, like hotels and gas stations.

When you preauthorize a payment, you make sure the money is there for what you need. It also makes your customers feel secure and informed. Knowing how to preauthorize a credit card can really help your business stay safe and make your customers happy.

Key Takeaways

• Preauthorizing a credit card ensures there’s enough money available.
• It’s often used when you can’t know the total cost beforehand.
• The hold doesn’t charge you right away but sets aside the funds.
• Credit card authorization makes things clear and reassuring for everyone.
• Learning and using preauthorization can boost your business and trust with customers.

Understanding Credit Card Preauthorization

Credit card preauthorization is useful for both merchants and consumers. It helps make transactions smoother and avoids financial issues. The process involves putting a hold on funds for future transactions.

What is Preauthorization?

Preauthorization, or an authorization hold, locks funds on a credit card temporarily. It makes sure funds are ready for the transaction. If the transaction doesn’t happen within a few days, the hold is removed, and the funds are returned.

Benefits of Preauthorizing Payments

Preauthorizing payments has many advantages. For merchants, it lowers fraud risks and saves on costs. It also means no refund penalties. For consumers, it ensures funds are ready for future expenses, making payments reliable.

How Long Do Preauthorizations Last?

Preauthorization holds can last from five to seven days. This time can vary based on the merchant’s financial institution. Some banks may hold funds longer, up to 30 days, for certain businesses.

Steps to Preauthorize a Credit Card

To preauthorize a credit card, your payment gateway must support it. You need to set up your payment systems to handle preauthorizations. This means configuring them for online or point-of-sale (POS) transactions.

First, the transaction is set as a preauthorization ‘hold’. This secures the funds in the customer’s account.

Then, you have about five days to complete the transaction. You must set up your payment gateway correctly for preauthorization. This includes setting the right parameters and choosing the correct transaction types.

To place a preauthorize card payment hold, start with a request for a preauthorization charge. This temporarily secures funds from the cardholder’s available balance. It reduces their spending limit without affecting their account balance.

Once the actual transaction is processed, the preauthorization hold is lifted. The charge is then applied to the cardholder’s credit card.

To use pre-authorization, you must configure your payment gateway. This involves selecting the right transaction types. Your shopping cart software or gateway must also send the preauthorization details. By holding the customer’s available credit, you secure the funds needed, often called a ‘reserve’. This effectively manages the preauthorize card transaction process.

Conclusion

Understanding credit card preauthorization is key in electronic transactions. It adds security for both merchants and customers. Merchants can place a hold on funds to protect against fraud and chargebacks.

Using credit card preauthorization also makes things clearer for customers. They can see the hold amount without it being taken out of their account right away. This builds trust and makes transactions smoother.

As more people use credit cards, knowing how to preauthorize them is vital for businesses. The hold is temporary but crucial for securing payments. By using preauthorization, you make transactions more reliable and focused on the customer. Contact IntegralPay to find out how card preauthorizations can work in your business!