What Is a Hold Authorization on a Credit Card?

Swiping a credit card through a terminal generates an authorization hold.

Authorization holds result from the process of approving a transaction on a credit card.

Process

When a credit card is swiped through a terminal, the cashier enters an amount for approval. This amount is subtracted from credit availability until the transaction is "settled." Settlement occurs when the cardholder and merchant banks enter the transaction in the books.

Most Cases

Most often, an authorization hold is for the same amount as the transaction. Once the purchase is approved and cleared through the system, the authorization hold is deleted.

Other Cases

The transaction amount and the authorization hold are sometimes different amounts. Gas stations, hotels, and car rental agencies are examples of establishments that authorize purchases before the actual amount is known.

Effects

When the transaction amount and authorization hold are the same amount, the credit availability is not affected by the authorization hold. When the amounts differ, the authorization hold might not be deleted for up to 30 days, resulting in both amounts reducing credit availability.

Considerations

Other reasons authorization holds can differ from the transaction amount include:
• Restaurants sometimes request approval for an amount in anticipation of a gratuity.
• The card might have been swiped twice for the same transaction.

References

• Wells Fargo: Authorizations
• Visa: Card Acceptance Guide