What is Temporary Authorization on Credit Card?
In the world of credit cards, temporary authorization is a term that refers to a specific process used by merchants to ensure that a transaction is valid before completing it. This authorization is a temporary hold on funds, which allows the merchant to verify the cardholder’s account and confirm that the transaction can be processed successfully. Understanding how temporary authorization works is crucial for both cardholders and merchants to ensure a smooth and secure transaction process.
How Temporary Authorization Works
When a customer makes a purchase using a credit card, the merchant initiates a temporary authorization request. This request is sent to the card issuer, which then places a hold on a certain amount of funds in the customer’s account. The hold is not a charge but rather a reservation of funds that will be released after a certain period, typically 7 to 30 days, depending on the card issuer and the merchant’s policies.
The purpose of this temporary authorization is to protect both the merchant and the cardholder. For the merchant, it ensures that the transaction can be processed without any issues, such as insufficient funds or a cancelled card. For the cardholder, it provides a safeguard against unauthorized transactions, as the temporary hold on funds will alert them if someone else tries to use their card without permission.
Temporary Authorization and Fraud Prevention
Temporary authorization plays a significant role in preventing credit card fraud. By placing a hold on funds, merchants can verify the cardholder’s identity and reduce the risk of fraudulent transactions. In case of suspicious activity, the merchant can cancel the authorization and request a new one, ensuring that the transaction is legitimate.
Moreover, temporary authorization helps in identifying potential fraudsters who may attempt to use stolen cards. If a cardholder notices an unauthorized transaction on their statement, they can contact their issuer to dispute the charge. The issuer can then investigate the transaction and, if it is indeed fraudulent, release the temporary authorization hold and reverse the charge.
Understanding Temporary Authorization Fees
It’s important to note that some merchants may charge a temporary authorization fee. This fee is typically a small percentage of the transaction amount and is intended to cover the costs associated with the authorization process. While some cardholders may find this practice unfair, it is a common practice among merchants to offset the expenses of verifying transactions.
Before making a purchase, it is advisable to inquire about any temporary authorization fees that may apply. This will help you make an informed decision and avoid any surprises on your credit card statement.
Conclusion
Temporary authorization on credit cards is a crucial process that ensures the security and integrity of transactions. By placing a temporary hold on funds, merchants can verify the cardholder’s account and reduce the risk of fraud. As a cardholder, understanding how temporary authorization works can help you identify unauthorized transactions and protect your financial interests. Always be aware of any temporary authorization fees and make informed decisions when using your credit card.
