What Is A Pending Authorization?

You’ve probably heard the term “pending authorization”. What does it mean exactly? And why should you care?

If you’ve ever bought something at a store (who hasn’t these days) with your credit card, you might have noticed “Pending Authorization” appears on your credit card statement for that purchase. 

Pending authorizations are those that haven’t been approved or denied yet. They appear in your bank account statement as a negative number.

In this article, we’ll be looking at what this term means, and looking at some closely related questions surrounding a “Pending Authorization” appearing on your statement. 

So let’s get into it and discuss what a Pending Authorization is and why payment processing is important!

What Is A Pending Authorization? 

In very simple terms, a pending authorization is a type of hold on an account when a credit card has been swiped or keyed in manually at a merchant. It follows a merchant’s request for authorization to charge the card for a specific amount of money. 

A Pending Authorization can be placed by a merchant, but also by a consumer. If a customer places a Pending Authorization on their own card, they’re doing so because they don’t want to pay for a transaction until they know if the card will work or not. 

This holds true for any kind of payment method: Credit cards, debit cards, prepaid cards, etc. In fact, even cash transactions can be put on hold by a consumer who doesn’t want to spend money without knowing whether the funds will actually show up in his/her account. 

Why Do Merchants Place Pending Authorizations On Your Card? 

The most common reason merchants place a Pending Authorization on your card is to prevent fraud. This happens when someone tries to use your card without your permission.

For example, say you were shopping online and found a great deal, but before paying for it, you decided to check out the merchant’s website to see if there was anything wrong with the product. 

You notice that the price is $50 more than the original listing, and decide to cancel the order. However, before you do so, you swipe your card and find a Pending Authorization on the line. 

Now, you could call the merchant and ask them about the Pending Authorization, but chances are good that they won’t tell you much, since they wouldn’t want to give away too many details about how they protect themselves from fraudulent purchases. 

But what would happen if you didn’t cancel the order? Would the merchant refund you? Or would they keep charging you until you canceled?

The answer depends entirely on the merchant’s policies. Some companies may offer refunds, while others may just continue charging you until you cancel. 

It’s important to note that this isn’t always the case. For example, if you make a purchase using a gift card, then the merchant cannot take back the charges once they go through.

So, if you buy something using a gift card, and later realize that the card wasn’t valid, you’d have no way of getting your money back.

What Does It Mean To Be On An Authorized Credit Card Statement?

When you use your credit card to make a purchase, your issuer will send an electronic message to your bank indicating whether the transaction was authorized or not.

If the transaction was authorized, then your bank will post a positive balance to your account reflecting the amount of money that was spent.

However, if the transaction was declined, then your bank will remove the positive balance from your account. This is because the merchant did not authorize the transaction. The reason for this could be any number of things:

 

• • The merchant didn’t accept your credit card.

• • Your card has expired.

• • You entered an incorrect billing address.

• • The merchant doesn’t accept your type of card (i.e., only Visa or MasterCard).

• • The merchant tried to charge you more than the agreed upon amount.

There are other reasons why a transaction might fail, but these are the most common ones.

How Can I Cancel My Pending Authorization?

If you don’t want to pay for something, then you should contact the merchant as soon as possible.

Most businesses will allow you to cancel your pending authorization at any time. You simply need to let them know that you’ve changed your mind.

If you’re unsure about canceling your pending authorization, then you can always ask your bank first. They’ll be able to tell you whether you’re allowed to cancel. 

How Long Do Pending Authorizations Usually Last? 

The simple answer to this question is between 1 and 30 days since the transaction was first made. 

This can seem like a long time, but it all depends on the type of merchant the transaction was made with, and if they remove the hold before it expires. 

For example, if you were to place a $10 order with Amazon, then Amazon would typically hold the funds in your account for up to 30 days. After that period of time, Amazon would release the funds to your bank.

So, if you placed an order for $10 worth of goods on January 2nd, then Amazon would hold those funds in your account until February 5th. After that date, Amazon would release the $10 to your bank.

Of course, there are exceptions to this rule. Sometimes merchants will hold funds for longer periods of time. For example, some merchants will hold your funds for 60 days after the initial transaction.

Summing Up 

Pending authorizations are just another form of protection offered by your bank. They’re a type of hold placed on a transaction for a number of reasons.

In many cases, the hold won’t last very long. However, it’s still a good idea to check with your bank to see how long the hold lasts.

They help prevent fraud by allowing you to spend money without having to wait for approval.

However, if you do decide to cancel your pending authorization, then your bank will usually release the funds back into your account within one to thirty days.

Understanding merchant processing is critical to small business success, here is a library of topics to master on the subject.