What Is an Authorization Hold and How Does It Work?

Understanding Authorization Holds

An authorization hold is a temporary reservation of funds placed on a credit or debit card. It occurs when a merchant requests verification from a card issuer that funds are available for a potential transaction. This action temporarily freezes a specific amount of money or credit on a cardholder’s account, earmarking it for a future purchase. This is not an actual charge, but rather a placeholder to secure the transaction.

The mechanism involves a two-step process: authorization and then settlement. The card issuer confirms the card’s validity and fund availability, placing a hold on the requested amount. This temporary deduction from the available balance differs from a posted transaction, where funds have been fully transferred. The hold amount is often an estimate, especially when the final transaction value is not known upfront.

Where You Might See Authorization Holds

Consumers frequently encounter authorization holds in transactions where the final amount is variable or unknown. Gas stations commonly place a pre-authorization hold when a card is used at the pump, often for an amount higher than the anticipated fuel purchase, to ensure coverage for a full tank. This hold adjusts to the actual amount after fueling is complete.

Hotels use holds for the room rate plus an estimated amount for incidentals, like room service or potential damages, which can be held for up to 30 days. Car rental agencies also place holds for the estimated rental cost along with an additional amount for potential extended use or damages. Restaurants often initiate a hold for the bill amount before a tip is added, which is later adjusted to include the gratuity.

How Holds Affect Your Funds

An authorization hold directly impacts a cardholder’s available balance, reducing the funds or credit they can access for other purchases. Although the money is not yet debited from the account, it is temporarily inaccessible. This temporary unavailability can lead to declined transactions if a cardholder attempts to make another purchase that exceeds their remaining available balance.

The duration of these holds varies considerably depending on the merchant, the card issuer, and the type of transaction. For debit cards, holds typically last between one and eight business days. Credit card holds can sometimes persist for up to 30 days, especially for lodging and vehicle rentals, though many resolve much sooner.

What to Do About Authorization Holds

To effectively manage authorization holds, regularly checking your online banking or card statements for pending transactions is helpful. These platforms typically display holds as temporary deductions from your available balance. Many banks offer notifications that can alert you to new authorization holds, providing real-time insight into your account status.

If a hold appears incorrect or takes longer than expected to be released, your first step should be to contact the merchant directly. Merchants often have the ability to manually release a hold, which can expedite the process. If the merchant cannot resolve the issue, or if the hold persists beyond typical durations, contacting your card issuer is the next appropriate action. Understanding the merchant’s hold policies before completing a transaction can help prevent future confusion.