What is Credit Card Pre-Authorization? - Ikajo Glossary


Card Pre-Authorization

Pre-authorization of a bank card is technically a process of blocking a fixed amount of money allocated to the card owner within the line of credit. This block occurs when ordering some service or product, the sum is not credited to the seller but remains inaccessible for the card owner. When the buyer has fully paid the invoice, all funds previously frozen within the framework of the pre-authorization function will be recovered to the account in full and become available for use. In other words, the blocked sum is not withdrawn from the account, and further will be available for the card owner.

In fact, this function is an authentication process that initiates the receiving of special code and blocks the requested sum of money without removing it from the account and without performing a settlement operation with a card. Thus, this credit card function provides an opportunity for sellers to avoid fraudulent activities and costs associated with refund payments, refusals for purchasing that can bring significant losses to the enterprise.

In other words, this function is not considered a payment operation. In fact, during this authorization process, a request for a code is initiated, and the sum is blocked without debiting the account. This is primarily done for verifying credit card authenticity.

Thus, it does not oblige you to make additional payments but is only insurance, both for the merchants and for the buyers. After the payment operations, the funds blocked on the account could be again available for a user.

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