What To Know About Authorizing Credit Card Payments?

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.

Authorization For Credit Card Transactions

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.

Automatic Authorization

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.

Manual Authorization

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:

  • A need to comply with local regulations
  • A need to comply with accounting standards of capturing payment only after the order is fulfilled
  • Reviewing fraud analysis on the credit card account before letting the order go through

Credit Card Authorization Period

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 typeAuthorization period
VisaUp to 30 days
MastercardUp to 30 days
DiscoverUp to 10 days
JCBUp to 10 days
American Express7 days
Diners Club7 days
China Union Pay7 days

Staying Ahead of Fraudsters

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. 

Impact Of Card Testing Attack

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:

  • First, a fraudster uses tools to submit hundreds to thousands of orders. A number of these orders can be approved. If you ship these orders to fraudulent buyers, you can suffer a loss from product sales.
  • Once the card issuer notices the problem, they may shut down your power to process orders.
  • You have to pay an authorization services fee to the payment gateway and the acquirer for each transaction. So, you didn’t earn revenue and you have to pay $40 to thousands of dollars a month for nothing.
  • You may also have to settle chargebacks and related fees for reversals.
  • Your business may get hit by the loss of customer trust and reputational damage for falling victim to credit card fraudsters.

Frequently Asked Questions About Credit Card Payment Authorizations

If you want to avoid problems with credit card payment authorizations, here are some things you should know.

1. What does authorization mean on a credit card?

Credit card authorization is gaining approval from your card issuer, through a credit card processor, that you can cover the cost of the transaction and there’s no need to worry about insufficient funds.

2. Is it safe to use a credit card authorization form?

With a credit card payment authorization form, businesses can avoid chargebacks, as they can guarantee that the customers agreed completely on the purchase.

3. How do I cancel a credit card pre-authorization?

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!

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