A credit card authorization is a general term, meaning that a transaction was processed through a credit card network (such as a Visa, Mastercard or American Express).
These “authorizations” can be a number of request types depending on the need of the merchant. Let’s take a look at pre-authorizations, purchases, and captures and how they compare.
Also referred to as a “pre-auth” or “auth-only”, a pre-authorization places a hold on the customer’s credit card for the desired amount. The credit card is verified, and the merchant is provided with an “Approval Code” for later use. These funds are now frozen on the credit card but have yet to be charged to the customer. The customer should not see the transaction appear, but will see their “available balance” drop by the pre-authorization amount.
The merchant is guaranteed those funds for up to 7 days but must process a “capture” in order to actually collect them. The original approval code can be used for up to 30 days, but it is possible for the funds to no longer be available after 7 days as the freeze will have expired.
Sometimes referred to as a “force”, a capture is the second step of the pre-authorization process. The merchant, using the original Approval Code from the pre-auth, is telling the card-network that the customer should now be billed. The merchant can choose to have the final capture amount be less or more than the original pre-auth amount. If more, it is possible that the capture will be declined as only the pre-authorization amount was guaranteed. If the capture is for less than the original pre-auth, the remaining funds are automatically made available to the customer.
Also referred to as “sale” or “auth+capture”, a purchase is the most common payment request type. It can be seen as a pre-authorization and capture combined into a single transaction. The merchant simply enters the desired amount, and the customer’s card is charged. There is no need to do a pre-authorization, nor is there a need to capture the transaction afterward.
Real World Example – Gas Station
Filling up your car at a gas station is a good real-world example of these transactions in action. The gas pump will usually do a pre-auth on your credit card for $100, and then let you start filling up your vehicle. Once full, the gas pump will capture the transaction for the final amount, such as $67, which automatically releases the remaining $33 back on your card.
When looking at your credit card statement, you should see a single charge for $67, not $100. However, if you were to go inside and pay at the counter, the gas station attendant would do a credit card purchase for $67, without the need for a pre-auth or capture. Still not sure which transaction type is the right one for you?
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