Characteristics of credit card pre-authorization
You’re a merchant that uses credit card pre-authorization but still do not now know what it exactly means? Read the post and see the whole definition.
In short, it is a process similar like many other credit card charges, with the exception that, instead of debiting money from the card, the funds are put on ‘hold’ for a few days.
The duration of this hold depends on the so-called MCC, or merchant classification code. Usually the hold lasts between four and seven days, and if you wait more than that – the pre-authorization may expire. In that case you will have to call the holder of the credit card and go over the payment process once again. As soon as the credit card has gone through the process of pre-authorization, the owner of the card cannot spend the money that are on ‘hold’, on something else. Yet, the merchant must obtain the funds within a week; otherwise the money will be released back to the credit card by the issuing bank.
The Advantages Of Card Pre-Authorization
One of the greatest benefits that come with pre-authorizations is that they can significantly reduce the possibilities for fraud, they reduce the costs for processing and pre-authorization also contributes towards better customer satisfaction.
Want to know more about card authorization? Check out his post: Things You Need To Know About Card Authorization
If the funds are withdrawn from the customer’s credit card and the products are not delivered on time, that can make the customers dissatisfied and angry. Most of the times, if the merchant uses pre-authorizations, the credit card will be charged after the goods are delivered to the customer. Often it can be costly for the merchants to keep inventories. That is why they usually go for minimal storage of products in their stores or warehouses. Pre-authorization is great for improving the overall experience of the customer, especially in those cases when the products are still not ready to be shipped in the moment of their purchasing.
How It Works?
Pre-authorization is a simple process. It is much similar like any other type of credit card transaction. There are minor differences from one payment processor to another, but generally it does not require doing anything special. Pre-authorizations also help in reducing different discount charges for the products that cannot be shipped right away.
If you want to make a pre-authorization over an online store, you need two things. First, you must have a debit and credit card payment processor which supports the process of pre-authorization, and you also need a shopping cart for sending transactions to the payment gateway. Although it sounds a bit complex, it is fairly simple process.
When you try to integrate the website with the gateway, you first must declare the transaction type that needs to be processed. If you have software for shopping carts you will need to specify whether you will go with the transactions as pre-authorizations or full-authorizations. Not all software support pre-authorizations of credit cards, but most of them do.
Holding the funds is easy thing to do. As soon as the hold is done, you need to login to the control panel of the payment processor, find the wanted transaction and press the button for capturing the funds. From this moment on, the pre-authorization transforms into full authorization.
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