Credit card authorizations happen all the time, even if we don’t fully know what they are. These are what are happening behind the scenes on your website when your customers actually click the pay button. Basically, when a customer uses a card to pay on your website, a card authorization request will be sent to the issuer to make sure that the card is valid. This is done to ensure that the customer actually has enough funds to pay the entirety of the transaction. If you’re interested in the process of credit card authorization and capture, here is a little more
information on how it works!
How Does Credit Card Authorization Work?
With every credit or debit card transaction, the merchant will actually send a request to the acquirer, which will normally be done through a credit card processor. The acquirer will then submit a request to the to the issuer to go over the customer’s account, determine whether the card is valid, and then figure out whether there are enough funds in the account to cover the transaction.
If the funds can complete the sale’s costs, then the processor will place an authorization hold on the customer’s account which will in turn lower the credit line by that sale amount. Then, the acquirer will receive either an approval or error code in turn. Naturally, if an error code is issued, then the transaction isn’t completed.
Throughout the authorization process of determining whether a transaction is valid or not, there are multiple people who need to work together: the cardholder, the merchant, the acquirer, card schemes, and the issuer.
Basically, merchants are able to keep their businesses safe from fraud by placing an authorization hold on card transactions. They are able to temporarily block funds for transactions so they can then verify it to make sure they will be paid.
In the end though, the authorization hold will be removed either when the merchant actually gets the charge or when the authorization expires. This is just done so that you have enough to verify and capture the funds they need to complete the transaction. So capturing is basically the process that happens after the authorization when the actual money transaction happens, but it usually happens automatically.
What Happens When Card Authorization Fails
Most of the time, failed authorizations will happen due to technical or financial problems. Normally, the payment processors will notify the online customers about these failures through displaying a notification that explains why their transaction couldn’t be completed. With this, the merchant can see what caused the failure through the use of its decline code.
Decline codes will be different depending on the acquirer. These codes can pop up because of technical issues or problems with the information that is sent to the processor. If it’s a technical issue though, the merchant or acquirer should fix it, depending on the basis of the problem.
Of course, you should only complete the transaction and ship your product if you receive an authorization code. A payment scenario with card authorization allows merchants to have the ability to vet for potentially fraudulent activity before actually delivering their goods or services. It also helps the merchant avoid having to issue refunds by cancelling payments before they’re captured and saving their time and transaction fees.