What Is a Credit Card Authorization Code?
Credit card authorization is the process by which credit card issuers approve, deny or refer transactions on a credit card presented to them for payment by a merchant. If the transaction is approved, an authorization code will be issued.
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Approval
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Approval is based on the status of the cardholder's account. The authorization code refers specifically to one single transaction, for easy tracking and reversal of the transaction if needed.
Actions
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Once the authorization code has been issued, it will trigger a number of different actions. The card-issuing bank will hold the funds, deduct the amount from the cardholder's credit limit and pay the funds into the merchant's account, usually at the end of the business day.
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Denial
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The credit card authorization may be denied due to insufficient funds, expiration of the card, a freeze on the card, fraud, or other issues concerning the credit card account.
Referral
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Occasionally, the merchant will get a referral notice, which usually indicates some inquiry concerning the credit card has been triggered, such as a security notice.
Security Codes on Credit Cards
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Credit card authorization codes are issued for all transactions, whether in-store, via mail or phone, or online. To help prevent credit card fraud, most credit cards have a three- or four-digit security code printed on either the back or the front of the card, referred to as CVV2 or CID codes depending on the type of card. This security code is separate from the credit card number, but should be collected by any online merchant who wants to ensure they get the credit card authorization codes issued quickly and easily.
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