Pre-authorization Fee
Understand how pre-authorization fee impacts your overall payment costs.
What is Pre-authorization Fee?
A pre-authorization charge (pre-auth or authorization hold) is a temporary hold on a customer’s funds, reserving money for a pending transaction without immediately debiting the account. For example, hotels or car rentals may place a hold higher than the base cost to cover extras or potential damages.
During the hold period, funds are unavailable to the customer but not yet transferred to the merchant. Once the final charge is confirmed, the hold is released and the exact amount is settled. If the merchant doesn’t confirm within the holding period, the funds are released back to the customer (“falling off”).
Pre-authorization differs from partial authorization, where only part of a payment is approved due to insufficient funds. Holds usually last about 5 days, but depending on the Merchant Classification Code (MCC) and industry (e.g., hotels, rentals), they can extend up to 31 days.
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