Credit Card Authorization

A credit card authorization is a hold for a certain amount of money that is applied to a cardholders credit account at their issuing bank.

An authorization reserves funds on a customer’s credit card, making them unavailable for other transactions. Within 24 to 48 hours the acquiring bank will use this authorization to transfer funds from the customer’s issuing bank to the merchant’s direct deposit account (DDA). This process is called settlement. If an authorization is dormant for too long, usually about 5 business days, the authorization will expire.

An authorization is not processed until a merchant clears the batch of credit card authorizations that are stored in the memory of their processing equipment. Clearing the batch of authorizations is a necessary and vital part of the credit card processing procedure. Once a batch is sent to the acquiring bank, the second part of the credit card processing procedure begins. This process is called clearing and settlement.