In today's fast-paced world, credit cards allow people to complete their purchases quickly and without hassle. As people prove how effective payment works for consumers, while learning more about the credit card payment process, their credit score goes up, allowing them to gain access to better credit opportunities.
To further understand how credit works, it is important to know about credit card payment authorization. So, how does credit card authorization work? Continue reading to find out.
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During the credit card payment process, a card authorization request will be triggered and the payment must be captured within the set authorization period. At this point, the credit card information of the customer will be sent to the bank for processing.
After a credit card payment is captured, the customer will be charged for the transaction. They are captured automatically, but you can also change the settings to capture them manually depending on your business.
Here is the difference between the two.
When making a payment by credit card, the payment processor completes the transaction automatically, by default. Automating authorization saves both the merchant and the customer time.
Businesses have the option to capture payments manually. Here, the merchant must capture whatever form of payment within the authorization period. The extra step of doing this manually adds time to the process, but it may be a necessity, especially in cases like:
The authorization period is done by all types of credit card payment providers. Through this process, they are able to verify the validity of the credit card and the availability of sufficient funds before they allow a charge to push through.
There is a specific time limit on credit card authorization and it is dictated by numerous factors. The card type, merchant category code, card network, and the type of card for payment all play a role in the length of authorization.
In some cases, you may encounter extended authorization periods. These things happen when specific credit cards are used by customers upon checkout. Here's a quick guide to identifying the length of the authorization period.
| Card type | Authorization period |
|---|---|
| Visa | Up to 30 days |
| Mastercard | Up to 30 days |
| Discover | Up to 10 days |
| JCB | Up to 10 days |
| American Express | 7 days |
| Diners Club | 7 days |
| China Union Pay | 7 days |
Whatever the size of your business, you should be aware of possible fraudsters that aim to target your company. Fraudsters don't consider the size of your business when targeting businesses; any business can be targeted.
According to the Federal Trade Commission, there were 459,297 reports of credit card fraud, including identity theft cases, in 2020. Fraud prevention techniques should be carefully considered, not only by you but also by your customers.
One of the most common credit problems is card testing, also known as auth testing. In this fraud strategy, fraudsters steal a credit card number and use it to test a small purchase on a random merchant.
They do this method to check if the purchase goes through. Once it does, they will use the actual payment card number for bigger purchases.
The problem with card testing attacks is they do not only harm customers. They also bring in an additional cost to merchants like you. Every transaction related to authorizing cards comes with a fee, and if that amount balloons, you will have to worry about a lot of expenses.
Here is a sample timeline of the impact of card testing attacks:
If you want to avoid problems with credit card payment authorizations, here are some things you should know.
Credit card authorization is gaining approval from your card issuer, through a credit card processor, so that you can cover the cost of the transaction and there's no need to worry about insufficient funds.
With a credit card payment authorization form, businesses can avoid chargebacks, as they can guarantee that the customers agreed completely on the purchase.
Canceling credit card pre-authorization requires a notification to the credit card provider. You can do it by calling the provider, sending an email, accessing the online banking platform, or writing a letter.
Credit cards make commerce easier for both merchants and customers. However, there's still a need to consider fraud and risk management. Credit card authorization can help mitigate these threats.
Learn more about the processing services for credit and debit cards by exploring Processing Card today!
Florence Carpenter is passionate about ensuring that the process of opening merchant accounts is as straightforward as possible. She graduated from the University of Michigan with a bachelor’s degree in Marketing.
