What Is Temporary Authorization on Credit Card?
A temporary authorization on a credit card, also known as a preauthorization, is a hold placed on funds in a customer’s account to ensure that there are sufficient funds available to cover the cost of a transaction. This temporary hold is typically placed by a merchant when a customer makes a purchase using their credit card.
The purpose of a temporary authorization is to protect both the merchant and the customer. For the merchant, it ensures that they will be paid for the goods or services provided. For the customer, it guarantees that the funds required for the transaction are available, reducing the risk of overspending or going into debt.
When a customer makes a purchase using their credit card, the merchant sends a request to the card issuer to verify that the card is valid and has sufficient funds to cover the transaction. The card issuer then places a temporary hold on the funds in the customer’s account, freezing those funds until the transaction is completed.
The amount of the temporary authorization is usually the estimated total cost of the transaction, including any taxes or additional fees. However, it is important to note that the actual charge may be different from the authorized amount. For example, if a customer makes a hotel reservation, the temporary authorization may be for the full cost of the stay, but the final charge may be adjusted based on the actual duration of the stay or any additional charges incurred.
The duration of a temporary authorization can vary depending on the merchant and the card issuer. In most cases, the hold will be released within a few days, once the transaction is completed. However, it is not uncommon for the hold to remain in place for up to a week or longer, especially for certain types of transactions, such as car rentals or hotel reservations.
During the time that a temporary authorization is in place, the funds are technically still available to the customer, but they are “frozen” and cannot be used for other purchases. This can sometimes lead to confusion or frustration, as customers may be unaware of the hold and assume that they have more funds available than they actually do.
Q: Can a temporary authorization be canceled?
A: No, a temporary authorization cannot be canceled by the cardholder. Only the merchant or the card issuer can release the hold once the transaction is completed.
Q: Will a temporary authorization affect my credit limit?
A: Yes, a temporary authorization will reduce the available credit on your card until the hold is released. This means that you may have less credit available for other purchases until the hold is lifted.
Q: What happens if the final charge differs from the temporary authorization amount?
A: If the final charge is lower than the authorized amount, the excess funds will be released back to your account. If the final charge is higher, the additional amount will be charged to your card.
Q: Can I dispute a temporary authorization?
A: If you believe that a temporary authorization has been placed in error or for an incorrect amount, you can contact your card issuer to dispute the charge. They will investigate the matter and take appropriate action to resolve the issue.
Q: Are there any risks associated with temporary authorizations?
A: While temporary authorizations are a common practice, there can be some risks involved. For example, if a hold is not released in a timely manner, it can tie up your funds and cause inconvenience. Additionally, some customers may experience overdraft fees or other financial difficulties if they are not aware of the hold and spend beyond their available balance.
In conclusion, temporary authorizations on credit cards are a necessary step to ensure that funds are available for a transaction. While they can be an inconvenience, understanding how they work and being aware of any holds on your account can help you manage your finances more effectively and avoid any unexpected surprises.