Pre-Authorization

What is Pre-Authorization?

Pre-authorization is a process where a merchant checks if a customer has enough funds for a transaction before the final amount is known. The bank places a temporary hold on the funds, ensuring they are available when the transaction is completed.

This is common in industries like hospitality and gas stations, where the final bill is determined after the service is provided. The hold is later replaced by the actual transaction amount during the capture stage.

Why It Matters

• Guarantees that funds will be available for the final payment

• Protects merchants from non-payment after a service has been rendered

• Prevents customers from overspending while a transaction is pending

• Allows for flexible pricing in service-based industries