You can pre-authorize a credit card transaction in the same way you would authorize one, but there are some differences that may be important to know.
If you’re wondering if it makes sense for your business to pre-authorize transactions, read on.
What Is Pre-Authorization?
Pre-authorizing a credit card transaction means that you have already agreed to pay the merchant before they charge your card.
This allows you to avoid any fees or charges associated with declined cards and also helps ensure that you don’t exceed your credit limit.
Pre-authorizing a transaction is different from authorizing a transaction because:
- You must provide your bank account number when you pre-authorize a transaction.
- The amount of money you agree to pay cannot change after you approve the transaction.
- You will not receive an email confirmation message when you pre-authorize a transaction.
If you do not want to pre-authorize a specific transaction, you can still use your debit card as usual. However, you will not be able to cancel the transaction once it has been processed by the merchant.
How Do I Authorize A Credit Card Transaction?
If you’ve ever used PayPal, you might notice that you can pre-authorize payments using their service.
When you pre-authorize payment, you set up a “hold” on your funds so that you won’t be charged until you confirm the transaction. Once you confirm the transaction, PayPal releases the hold on your funds.
When you authorize a transaction through PayPal, you enter your credit card information into the website where you make the purchase.
After entering this information, PayPal emails you confirming that the transaction was successful.
When you pre-authorize payments, you must provide your bank account numbers to the merchant. In addition, you must give them permission to release the hold on your funds (if applicable).
Why Should I Use Pre-Authorized Transactions?
There are several reasons why you should consider using pre-authorized transactions.
First, you can avoid paying additional fees for declined transactions. Second, you can reduce the risk of exceeding your credit limit.
Third, you can help prevent fraud. Fourth, you can send out invoices faster. Fifth, you can keep track of all your transactions in one place.
However, you need to understand that pre-authorizing a transaction does carry risks.
For example, if you fail to follow up on the transaction within the next 60 days, the merchant may report the transaction as fraudulent. Also, if you overspend your credit limit, you could incur extra fees.
Finally, if your bank account balance drops below zero, you could lose access to your funds.
Is It Possible To Cancel A Pre-Authorized Transaction?
Yes, it is possible to cancel a pre-authorized transaction. Just like you can cancel an authorized transaction, you can cancel a pre-authorization by contacting the merchant directly.
If you decide to cancel a pre-authorization, you must notify the merchant immediately. Otherwise, the merchant will automatically release the hold on your account.
What Happens If My Account Balance Drops Below Zero?
Pre-authorizing a transaction means that you have agreed to pay the full amount of the transaction before the transaction takes place.
Therefore, if your account balance falls below zero, you will not be allowed to withdraw any money from your account. This means that you cannot spend more than what you have available in your account.
You can resolve this problem by either increasing your available funds or withdrawing some money from another source.
Pre-Authorizing Payments Through Your Bank Account
If you would rather not deal with the hassle of dealing with your own bank accounts on a regular basis, you can also pre-authorize payments through your bank account.
You simply need to contact your financial institution and ask them to allow you to pre-authorize certain types of transactions.
How Can I Pre-Authorize An Online Purchase With PayPal?
The first step is to log into your PayPal account. Then click on the ‘Payments & Billing’ tab. From here, you can select the type of transaction you want to pre-authorize.
The most common option is to pre-authorize a payment when someone makes a purchase from your online store.
However, you can also pre-authorize a payment when a customer pays you for services rendered.
Once you have selected the type of transaction you wish to pre-authorize, click on the ‘Add Payment Method’ button.
On the following page, enter the details of the transaction you want to pre-authorize. Click on the ‘Save Changes’ button in the bottom right corner of the screen.
How Do I Know When Someone Has Made A Purchase Using My Pre-Authorized Payment Method?
When someone has made a purchase using a pre-authorized payment method, you will typically receive an email confirmation.
In addition, you will usually receive an automatic notification via SMS once the transaction has been completed.
How Long Does It Take To Process A Pre-Authorized Payment?
This depends on how many people are involved in the transaction. Typically, it only takes a few minutes to process a single pre-authorized transaction, but larger transactions might take longer.
Is There Any Fee Associated With Pre-Authorizing A Transaction?
No, there is no fee associated with pre-authorizing a transaction.
To conclude, you can pre-authorize a transaction without having to worry about whether the transaction will go ahead. This allows you to save time and avoid unnecessary stress.
It typically takes only a few minutes for a pre-authorized transaction to be processed, however, larger transactions may take a longer period of time.
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Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.