Pre-Authorization

Pre-authorization is a banking term describing a practice where money is not taken from the payee’s account at the moment the transaction is made. The amount charged is instead made unavailable on that customers’ account – this is also known as authorization hold. Pre-authorisation is normally valid for 1- 5 days on debit cards, while credit card pre-auth periods can be longer and vary between issuers. This pre-auth period is usually used by retailers to make additional security checks on the card and the cardholder, to make sure that the transaction is not fraudulent. It also allows them time to make sure that the item being sold is in stock and ready to be shipped. Consumers near their credit or debit limits need to watch their available balances carefully, or the hold amount could push them over the limit, triggering a fee. Holds, also called blocks, are usually released within minutes or hours, but can sometimes last days.