What Is a Pre-Authorization Charge?
Understand what a pre-authorization charge is, how these temporary holds affect your funds, and how to effectively manage them.
A pre-authorization charge is a temporary hold placed on a specific amount of funds on a credit or debit card. It verifies card validity and sufficient funds for a future payment. This allows the transaction to proceed without immediate deduction, acting as a reservation of funds for a later, final payment.
The Nature of a Pre-Authorization Charge
When a pre-authorization is initiated, the requested amount is set aside by the card issuer, which then reduces your available balance or credit limit. For credit cards, this means a portion of your available credit is temporarily inaccessible, while for debit cards, the corresponding amount in your bank account is locked, though the funds are not yet transferred out.
From a merchant’s perspective, this temporary hold ensures a customer has adequate funds, particularly when the final cost is uncertain. It can also serve to cover potential incidentals, damages, or to estimate a final bill that will be settled later. This process allows businesses to confirm payment capability and mitigate risk before rendering a service or delivering a product.
Where You Encounter Pre-Authorizations
Pre-authorization charges are common in various industries where the final transaction amount is not known upfront or where services are rendered over time. Hotels frequently use them to cover the cost of a stay along with potential incidental charges, such as room service, mini-bar usage, or any damages incurred. This practice provides security, assuring the hotel that funds are available for additional costs without needing payment at check-out.
Rental car companies also widely employ pre-authorizations, typically to secure a deposit for potential damages to the vehicle, fuel charges, or extended rental periods. This hold ensures that the company can cover unforeseen expenses once the car is returned. Similarly, gas stations often place a pre-authorization hold when you pay at the pump, verifying that sufficient funds exist before you begin fueling. This is necessary because the exact amount of fuel you will purchase is unknown at the start of the transaction.
Managing Pre-Authorization Holds
The duration of a pre-authorization hold can vary, typically lasting anywhere from a few days to a week. For many transactions, holds are released within five to seven days. However, for certain industries like hotels and car rental companies, holds might remain for a longer period, potentially up to 30 days, depending on the merchant’s policies and the card issuer’s practices. Gas station pre-authorizations, while sometimes set for a higher initial amount, usually clear within 72 hours.
A pre-authorization hold is released in one of two ways: either the merchant completes the transaction for the final amount, which then replaces the hold with an actual charge, or the hold automatically expires if the transaction is not finalized. If the final charge is less than the pre-authorized amount, the remaining portion of the hold is released, making those funds available again. If a hold persists longer than expected, checking your bank or credit card statements for pending transactions is a first step. If the hold is still present after the typical timeframe, contacting the merchant directly to inquire about its status is recommended. If the merchant confirms release but the funds remain held, reaching out to your bank or credit card company for assistance in resolving the matter is the next step.