Pre-Authorization Charge Explained: Understanding Credit and Debit Card Holds

Pre-authorization charges, also known as authorization holds or pre-auths, are temporary holds on a customer’s credit or debit card for certain transactions. They serve as a way for merchants to confirm the availability of funds in the cardholder’s account and ensure that the account is in good standing before proceeding with the transaction. Typically, these holds last for around 5 days, but the duration can vary depending on the bank’s policies and the type of transaction being processed.

An important aspect of pre-authorization charges is that they do not represent an actual charge or withdrawal of funds from the customer’s account. Instead, they act as a placeholder, reserving a specific amount of the cardholder’s available funds for the merchant upon completion of the transaction process. Once the transaction is fully processed and settled, the initial authorization hold is either replaced by a finalized charge or released back to the customer’s account balance, depending on the outcome of the transaction.

Understanding the role and purpose of pre-authorization charges can be beneficial for both merchants and customers, as they help minimize the risk of declined transactions, manage disputes, and maintain a smooth payment processing experience. While these holds may cause temporary confusion for some customers, they can be considered a critical component of the financial industry’s efforts to maintain security and trust in electronic payments.

Defining Pre-Authorization Charge

A pre-authorization charge, also known as a pre-auth or authorization hold, is a temporary hold on a customer’s credit or debit card. This hold is typically implemented by merchants for certain transactions to ensure that the cardholder has sufficient funds available for the purchase or service. The hold usually lasts around 5 days, but it can vary depending on the merchant and the card issuer’s policies. Tidal Commerce and Stax Payments provide more information about pre-authorization charges.

When a pre-authorization hold is placed, the cardholder’s available balance is temporarily reduced by the amount of the hold. This essentially “reserves” the funds for the merchant until the transaction is completed or the hold expires. It is important to note that the actual charge is not made until the transaction is finalized. If the hold expires before the transaction is completed, the funds are released back to the cardholder’s account. Pre-authorization charges are commonly used in scenarios such as hotel bookings, rental car reservations, and online purchases where the final amount may be adjusted upon completion of the service or transaction. Money Crashers explains this further.

Pre-authorization charges offer several advantages for both merchants and customers. For merchants, they help reduce the risk of insufficient funds, chargebacks, and fraud by providing a layer of verification for the cardholder’s available balance. For customers, they provide a way to ensure that funds are available for a transaction without having their card charged immediately. This can help prevent accidental overcharges, as the hold amount is eventually subtracted from the total transaction amount when the payment is processed. Chargebacks911 offers more details on the benefits of pre-authorization settlements.

Why Merchants Use Pre-Authorization Holds

Merchants use pre-authorization holds as a way to ensure that customers have sufficient funds available in their credit or debit card accounts to cover the full cost of a transaction. This practice helps protect merchants from potential loss due to insufficient funds or payment disputes.

Pre-authorization holds are particularly common in industries that have a higher likelihood of changes in transaction amounts, such as hotels, car rental agencies, and gas stations. For example, hotels may place a hold on a guest’s card to cover the cost of the room, taxes, and potential incidentals. Similarly, car rental agencies typically use holds to cover rental charges as well as potential fees for extras or damages.

During the pre-authorization process, the customer’s bank checks the account balance and temporarily reserves the transaction amount. This hold, which can last between 1-30 days depending on the type of merchant and whether they remove the hold before it expires, ensures that the funds will be available when the merchant submits the final transaction for settlement.

Some benefits of using pre-authorization holds for merchants include:

  • Reducing the risk of chargebacks or payment disputes
  • Improving cash flow by ensuring timely payment collection
  • Minimizing administrative tasks related to payment processing
  • Enhancing customer experience by allowing seamless transactions

It’s important for merchants to carefully manage pre-authorization holds, as excessive or prolonged holds can lead to customer dissatisfaction and potential damage to the merchant’s reputation.

How Long Do Pre-Authorization Holds Last

Pre-authorization holds on credit and debit cards generally last for a specific duration. The length of time a hold remains on your account depends on factors like the issuing bank and the type of transaction being processed.

In some cases, a credit card authorization can last between 1-30 days, depending on the merchant and whether they remove the hold before it expires. However, the hold duration may vary among different banks and transaction types.

Authorization holds are commonly used for pending transactions such as hotel bookings, car rentals, and fuel purchases. For these types of transactions, merchants may place a temporary hold on the cardholder’s account to secure the payment once the service is rendered in full. The hold amount is usually released once the transaction is completed and processed, or after the hold expires.

It is essential for cardholders to be aware of the potential impact of pre-authorization holds on their available balance, as these holds can temporarily reduce the available credit or funds in an account. By understanding how long pre-authorization holds may last, cardholders can better manage their finances and avoid declined transactions or unexpected fees.

How to Avoid or Resolve Pre-Authorization Holds

To avoid or resolve pre-authorization holds on credit or debit cards, both cardholders and merchants can take specific steps. This section provides some helpful tips and actions to minimize the impact of these holds.

For Cardholders:

  • Monitor your account regularly to identify pre-authorization holds and ensure you have enough funds available to cover them.
  • Contact the merchant to inquire about any holds and request their removal if the charges have been settled or in case of errors.
  • Consider using credit cards for transactions involving pre-authorizations, as they may have less impact on your available funds than debit cards.
  • Keep your contact information up-to-date with your card issuer to receive notifications about holds and other account activities.

For Merchants:

  • Make sure to communicate with customers about possible pre-authorization holds and provide clear guidelines on when they can expect the hold to be released.
  • Release the hold as quickly as possible once transactions are finalized or if customers cancel their services or reservations.
  • Establish policies that minimize the number of pre-authorization holds, such as setting minimum transaction amounts or using alternative payment methods.
  • Train your staff to handle customers’ inquiries about pre-authorization holds and provide them with the necessary tools to assist in resolving or removing the holds.


In summary, a pre-authorization charge, also known as a credit or debit card hold, is a temporary transaction used by merchants to verify the availability of funds on a cardholder’s account before completing a purchase. This practice ensures that the cardholder has sufficient funds or available credit and helps prevent overspending and fraud.

Pre-authorization holds can last anywhere from 1 to 30 days, depending on the merchant and whether the hold is removed before it expires. It is essential for consumers to be aware of these holds, as they can temporarily reduce their available credit or account balance, potentially causing declined transactions or overdraft fees.

Merchants should also carefully consider the use of pre-authorization holds, ensuring that they remove holds promptly and communicate their policies to customers in order to prevent confusion and dissatisfaction. By being aware of pre-authorization charges and how they work, both consumers and merchants can more effectively manage their finances and enjoy smoother, more successful transactions.

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