When you have decided to begin using a credit card, it is imperative that you understand all of the terminology that goes along with it. If you find yourself asking “What is a credit card authorization” look no further.
A Credit Card Authorization or “authorization hold” is the practice within the banking industry of authorizing electronic transactions done with a debit card or credit card and holding this balance as unavailable either until the merchant clears the transaction, or the hold “falls off.”
You may have seen your online banking statement showing a “current balance” and “available balance” and have noticed a discrepancy now and then. This discrepancy is typically due to a charge being authorized against your credit card, but not yet having been cleared. The bank is aware that the charge is pending and shows the difference in the “available balance” column.
There are several common credit card authorization methods:
- Terminal: actually swiping the card
- Voice: reading your card number to a sales representative over the phone
- Direct solutions/Autobats: Obtained when a company compiles their sales at the end of the day and transmit them to the merchant for processing
- Tape authorizations: via personal computer – similar to terminal
- Tape ECR (Electronic Cash Register): works like terminal