What is a Pre-Authorization and how does it work?

What is a Pre-Authorization and how does it work?

Pre-authorization, commonly known as pre-auth or auth-only, are a hold placed on a cardholder's account to guarantee access to said funds, basically confirming that your card is actually good for that amount. This is a common practice among merchants in order to avoid fraud attempts from taking place. 

For example, let's say you have a card with a $750 balance and you make a $500 purchase at a furniture store. The merchant will actually place a "pre-auth" w​​​​ith that amount on your card.  This is why you'll see your available balance decrease to $250 but your current balance stays at $750. Your balance will continue to remain at that amount until the merchant actually "finalizes" the transaction and charge your account for it. 
Some restaurants will send a pre-auth request on your card the moment the card is put in the terminal. 
Certain merchants, like gas stations, also charge a high pre-authorization amount. Why is this? This is because the merchant doesn’t know how much gas you’re getting and wants to ensure there’s enough credit to cover it. It’s up to the gas station’s discretion to set the hold amount. 

Example: You pull up to the gas pump and swipe your payment card. A request for a predetermined amount, which may be more than the purchase amount, is sent to the card issuer. The pre-authorization hold can range from as little as $1 to more than $100. In some instances, the amount of the hold is displayed on the payment terminal. 

Note that your purchase may appear twice in your transaction history but will be billed to your account only once as one of these charges is the actual "charge" while the other is a "pre-authorization". It is simply a visual cue that marks the point where the pre-authorization request was placed and the actual charge. This is also why you do not see a "reversal" charge since there no funds to be reversed in the first place. 

Should you require a manual confirmation on this matter, please don't be afraid to create a support ticket with our team. 

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