What Is an Authorization Adjustment on a Credit Card?

When a credit card is used, a temporary hold on funds occurs before the transaction is finalized. Understanding these aspects provides clarity on how your available credit is impacted and how charges appear on your statement. These temporary holds and their modifications are a routine part of modern payment systems.

Understanding Credit Card Authorizations

A credit card authorization is an initial request from a merchant to a card issuer to verify that a card is valid and possesses sufficient available credit for a transaction. During authorization, the money itself does not immediately transfer to the merchant; instead, a temporary hold is placed on the estimated funds.

This temporary hold reduces the cardholder’s available credit, ensuring those funds are reserved for the transaction. It acts as a provisional reservation, confirming the card’s validity and the availability of funds without completing the financial transfer.

The authorization phase differs from a settled transaction, which is the final stage where funds are actually transferred from the cardholder’s account to the merchant’s account. An authorization appears on your account as a “pending” transaction, indicating that the charge has been approved but is not yet fully processed. These holds usually last from a few minutes up to several days, though some can extend longer depending on the merchant and card issuer.

Defining Authorization Adjustments

An authorization adjustment refers to a modification to an existing credit card authorization. This occurs when the final transaction amount differs from the initial amount that was temporarily held. The purpose of an adjustment is to align the initial estimated hold with the actual, finalized cost.

These adjustments can result in either an increase or a decrease to the original authorized amount. An increase happens when additional charges are added, such as a tip at a restaurant or extra services at a hotel. Conversely, a decrease occurs if the final charge is less than the initial estimate, or if a pre-authorized amount was larger than the actual purchase.

Merchants might obtain an initial authorization for an estimated total, particularly when the exact cost is not known upfront. This estimated authorization then undergoes an adjustment to reflect the precise amount once the transaction is complete. The ability to adjust an authorization provides flexibility for businesses where the final charge is variable.

This process is distinct from voiding a transaction, which cancels a previously authorized payment entirely, releasing the held funds. An authorization adjustment, by contrast, changes the amount of an existing hold before it is converted into a final charge.

Situations Leading to Adjustments

Authorization adjustments occur in scenarios where the final transaction amount is not known at the time of initial card swipe or online input.

One frequent example is at gas stations, where a small initial authorization, often ranging from $1 to $100, is placed to verify card validity and available funds. The final charge reflects the precise cost of the gas purchased.

Hotels frequently use pre-authorizations when guests check in, securing an estimated amount for the room rate and potential incidentals like mini-bar use or room service. The final bill includes any additional charges incurred during the stay.

Similarly, car rental companies place a pre-authorization for the estimated rental period and possible extra fees. The final cost is determined once the vehicle is returned and inspected.

In restaurants, an initial authorization is obtained for the meal’s cost before a tip is added. The final transaction includes the gratuity.

For online orders, especially those with delayed shipping or variable item availability, an initial authorization might be placed when the order is submitted. This authorization can be adjusted if items are added or removed from the order, or if shipping costs change before the order is fully processed and shipped.

Monitoring Your Account and Next Steps

Authorization adjustments appear on your credit card account as pending transactions that change in amount before they become final, or as an initial pending charge followed by a separate, settled charge. Monitoring your online banking portal or reviewing your monthly statements regularly is important to track these changes and ensure accuracy. While a pending charge reduces your available credit, it does not accrue interest until it is fully posted and becomes part of your balance.

If you notice an authorization adjustment that seems incorrect or unfamiliar, review your receipts or transaction records. If a discrepancy is identified, contact the merchant directly to clarify the charge. Resolving issues with the merchant first is often the quickest path to a resolution.

If you are unable to resolve the issue with the merchant, contact your credit card issuer to dispute the charge. Federal law provides cardholders with 60 days from the statement date to report a billing error. The card issuer must acknowledge your dispute within 30 days and has up to two billing cycles, or 90 days, to investigate and resolve the claim.