- September 30, 2017
- Posted by: ipaytotal
- Category: High Risk Merchant Accounts, International Bank Accounts, Money Transfers
If you’re a business owner who accepts credit cards, you’ve likely heard the terms “authorization” and “capture” before. You may even know what those words mean and how they affect your business, but how much do you know about the delay in Credit Card Authorisation. We’re talking about the day (or several days) between when a customer makes a credit card purchase and when the money actually appears in your account. Let’s talk some more about this very important step in the credit card process.
Authorization vs. Capture
First, let’s spend some time going over a few key terms. Authorization refers to the process by which the business owner confirms that the customer actually has funds available on their card to complete the transaction. This is what’s happening in the seconds or minutes after a customer swipes their card and before they sign on the dotted line. When “Approved” flashes on the screen, the funds are earmarked for that particular business and transaction — the customer can’t spend those dollars anywhere else. They’ll see their credit limit decreased by the amount of the transaction and be able to view the charge in its pending state in their online account.
Capture, on the other hand, refers to the process by which a transaction moves out of the pending state and you get your money. Basically, the business owner must give the “thumbs up” to the transaction within a certain number of days to verify that they really do want to process it before the funds are released. (Don’t worry, in many cases, this is handled automatically — ask your credit card processor for more details.) Some POS and/or shopping cart systems issue the capture immediately, resulting in a very short delay. This might seem ideal because you’ll get your money faster, but in reality, it opens the door for fraud, chargebacks, and all kinds of other headaches. At least a short waiting period is recommended as a security measure.
How Long Do I Have?
Depending on the type of business you have, it may be advantageous to extend the time period before the authorization and captured by a few extra days. Some examples are hotels, who often issue pre-authorizations to cover incidental charges during a guest’s stay, restaurants, who may need to wait and see what tip the customer would like to leave, and e-commerce businesses, who may wish to wait until an order has shipped before charging the card. So how long does a business owner have to capture funds? The answer varies between credit card companies and even between payment gateways. Your credit card processing provider can help you navigate the rules for your situation. In general, however, authorizations will expire in about five to ten days.
What Happens if I Decide Not to Capture the Funds?
The charges will simply “fall off” the customer’s card, and they won’t be charged. They’ll see their credit limit increase again and the charge will no longer be visible in pending status. From the business owner’s perspective, those funds are no longer earmarked for you and you can no longer access them. If you decide you’ve made a mistake and really did mean to capture that money, you’re out of luck. You’ll need the customer to re-swipe their card (basically make another purchase) in order to generate a new authorization.
I’m Confused — Help!
No worries. That’s what we’re here for! We understand that the payment process can get confusing and that there’s a lot of conflicting information out there. Give us a call at+44 800 776 5988 or get in touch with us through our website. Even if you’re not a customer of ours, we want to help you understand the process so you can make the best decisions for your business. We believe transparency and proactive education is the best policy.