How Long Is a Credit Card Authorization Good For?

Understanding Credit Card Authorization

When a credit card transaction occurs, the initial step involves an authorization process. This confirms the card is valid and the cardholder has sufficient funds or credit to cover the purchase. It is a communication between the merchant’s payment processor and the customer’s issuing bank. This check happens rapidly, typically within seconds, regardless of how the card is used.

An authorization’s purpose is to reserve funds, placing a temporary hold on that amount within the customer’s account. This hold reduces the customer’s available credit limit or bank balance. Authorization is not the actual transfer of money; it merely confirms fund availability. The funds remain in the cardholder’s account, marked as pending, until the transaction proceeds to the next stage.

Typical Authorization Durations

Credit card authorizations typically remain valid for a few days for most standard transactions. Many expire within 5 to 10 days. Duration is influenced by the card network (Visa, Mastercard, American Express, Discover) and merchant processing procedures.

Card networks set guidelines, balancing merchant settlement needs with cardholder fund availability. For instance, many card-not-present transactions, like online purchases, often have a standard authorization period of about seven days. Merchants should settle transactions within these timeframes to avoid fees or chargeback risks.

Specific Authorization Situations

Authorization durations differ in specialized transaction scenarios. Pre-authorizations are used when the final amount is unknown, such as in hotels, car rentals, and gas stations. A hotel might hold the estimated stay cost plus incidentals, lasting up to 30 days. Gas stations pre-authorize a set amount, like $100, then adjust to the actual amount used.

For online purchases with delayed shipping, authorization holds may need longer periods. If a product ships later, the initial authorization may last until shipment. Merchants may need to re-authorize if the initial hold expires before fulfillment. Recurring payments, like subscriptions, involve an initial authorization to verify the card. Subsequent charges are processed regularly based on a pre-signed agreement. These agreements allow ongoing charges without new authorizations for each payment.

Authorization Expiration and The Settlement Process

When a credit card authorization expires without finalization, the temporary hold on funds is automatically released. The reserved amount becomes available again in the cardholder’s account. If an authorization expires before settlement, merchants must obtain a new authorization or risk non-payment.

Settlement is the process where authorized funds are transferred from the customer’s issuing bank to the merchant’s acquiring bank. This step typically occurs after the merchant batches and submits all approved transactions, often at the end of a business day. The actual transfer of funds usually takes a few business days to complete after settlement. Merchants must ensure settlement occurs before authorization expires to avoid late presentment fees or increased chargeback risks. Expiration can lead to a declined transaction or the need to re-engage the customer for payment.