Credit card authorization gives merchants the approval to charge funds to a customer’s credit card. Authorization for credit card use is given for a set time period, and it entails a certain amount.
With the majority of charges, when the customer pays at the time of purchase, the charge is made immediately after the authorization. In other cases, like recurring payment authorizations, merchants will have open authorization on a set amount.
Here’s what you need to know about credit card authorization to protect yourself as a consumer.
What does credit card authorization mean?
Credit card authorization is the approval that a merchant receives to charge a customer’s credit card for a specific amount of money. This type of authorization gives the merchant the right to make the charge. However, at that point, the charge has not gone through, so it will not show up on the customer’s account right away.
If you’ve ever checked into a hotel, they might have asked for a credit card that they can put on file for future expenses. At that point, they will request credit card authorization. As long as they don’t ask you to write your credit card information down, the credit card authorization will be secure.
How does credit card authorization work?
The credit card authorization process involves four parties. These include the buyer, the bank that issued the buyer’s credit card, the merchant or seller and bank or credit card processor. The customer’s bank will either approve or decline each charge based on the funds available as well as the credit card information.
If all of the information is correct and the customer has enough credit to complete the charge, a credit card authorization hold will be placed on the customer’s account. From there, the acquirer will receive a code of approval. At that point, the charge will be authorized and the transaction will take place. However, if the transaction is canceled or declined for any reason, the merchant’s bank will receive an error code.
The credit card authorization amount will either be for a single purchase at a set time or for ongoing authorizations. In the case of a single authorization, every time you enter your credit card to pay online, the merchant will have to receive credit card authorization before the purchase is complete.
Multiple authorizations occur when you sign up for a subscription, regular deliveries or recurring payments. For instance, credit card authorization will be at play when paying for revolving services such as Amazon’s subscriptions.
Why has my credit card authorization failed?
Credit card authorizations can fail for a variety of reasons. While it can be frustrating and embarrassing, there are several things you can do. Here are the most common reasons as to why a credit card authorization fails and what you can do if your card is not authorized.
Incorrect information
It can be easy to accidentally enter a number incorrectly when filling out online forms. If your credit card authorization fails, your information is the first thing to check. For instance, if you entered your card number incorrectly, you can go back and correct it.
The charge will usually go through after you do so. Similarly, if you are asked to select the type of card that you have, whether it’s a Visa, Mastercard, American Express, but you select the wrong type of card, the authorization will also fail. Correct the mistake, and the charge should go through after all.
Insufficient funds
If the card has a credit limit of $500 and you try to charge a $1,000 purchase, the charge will fail. Likewise, if the card has a limit of $1,000 and you’ve already charged purchases close to the limit, the issuing bank will decline the transaction.
Make sure you know what your credit limit is, and take measures to stay below it. For maximum credit score building, try to keep your total charges below 30% of your overall credit limit.
Travel
If your credit card company sees that new charges are being made in cities that you do not usually make purchases from, they may block the card. Whether or not this is an issue depends on your regular spending patterns and whether the fraud department flags out-of-state or international charges.
To avoid situations where your bank declines your charges while you’re traveling, inform your issuing bank or credit card company before your trip. Notify them of your destinations along the way as well as your intended travel dates. This can often be done via the issuer’s app.
Suspicious activity
Suspicious activity refers to any charges that the credit card issuer deems to be outside of your usual pattern of spending. It can include an exceptionally large charge, charges in new cities, multiple airline tickets purchased around the same time and various other unusual expenses.
If you’re planning to make a large purchase and it is something you would not normally charge, like a new computer, inform your credit card company ahead of time. This will increase the likelihood of you being able to avoid a declined charge.
Missed payments
A single missed payment will not usually cause a credit card issuer to block charges. However, if you miss your payments multiple times or fail to pay after realizing you have missed one of your payments, they may block further charges until you are caught up on your payments.
To avoid this, pay your credit card bill on time. You can set up an autopay for the minimum payment to avoid missing payments in the future. If you do end up missing a payment, contact the credit card company as soon as possible to pay off your debt.
Expired cards
Credit cards are valid until the final day of the month of expiration, but each card will have its own expiration month to keep in mind. For example, a card that expires in the month of 07/22, or July of 2022, could have been used through the 31st of July, but it could no longer be used come August 1st.
If your account is in good standing, card issuers will send you a new card in the mail about one month before the expiration date. Double-check that your credit card hasn’t expired. If it has and you have’t received a replacement, contact the card issuer to ask for one.
Do you need to transfer money for a credit card authorization?
Credit card authorization is the permission that is granted to finalize a purchase. You do not need to transfer money for the credit card authorization process. When the purchase goes through, the issuing bank, which is the customer’s bank, will transfer funds to the merchant’s processor on the customer’s behalf.
Credit card authorization vs debit card authorization
In most scenarios, the authorization processes for both credit cards and debit cards are largely the same. The only difference is that, with debit card purchases, once authorization is given and the purchase is complete, the funds are deducted from the customer’s bank account linked to the debit card.
Is credit card authorization the same as purchase authorization?
Credit card authorization is not the same as purchase authorization. Rather, purchase authorization is given after credit card authorization. It is the final step in the purchase process. While credit card authorization can remain open, purchase authorization is the final step of purchase approval.
Credit card authorization summarized
Credit card authorization is a simple step in the process of making a purchase that is paid for with a credit card. It can protect both consumers and merchants by confirming the transfer before allowing it to take place.
If your credit card authorization is declined, don’t panic. It can happen to anyone. Call your credit card company to find out why the charge was declined and ask about how you can resolve it. Remember that credit card authorization is designed to protect you against theft and unauthorized charges so it’s better to be safe than sorry.
FAQs
Why does my card say not authorized?
Your card could say not authorized because of wrong information, an attempt to make a charge beyond your credit limit or an expired card. Credit cards can also fail to be authorized if your spending patterns change, like while traveling, and the credit card company believes the charge is fraudulent.
What does debit card authorization mean?
Debit card authorization means that the merchant has permission to charge the debit card for a set amount. Following debit card authorization, you’ll usually see that your bank has noted the initial purchase amount before deducting the purchase.
What does it mean if my credit card is not authorized ?
If your credit card is not authorized, it means the credit card issuer did not approve the charge. This can happen for a variety of reasons. If it is not immediately obvious to you, such as incorrect card numbers or expired cards, then you should call your card issuer to find out why the credit card purchase was not authorized.
