Credit card authorization hold and order cancellation

Created by James Wong, Modified on Thu, 11 Jan 2024 at 05:11 PM by James Wong

Authorization hold is a common practice in the financial industry that can sometimes cause confusion among buyers. This knowledgebase aims to shed light on what authorization hold are, why they exist, and why it may take several days for a bank to restore the account balance after cancelling an order.

What is an authorization hold?

An authorization hold is a temporary deduction from your available credit or account balance. It occurs when a merchant requests approval from your bank for a specific amount, often before the actual transaction takes place.

Why is authorization hold required?

Authorization hold ensure that a buyer has sufficient funds or credit to cover the anticipated purchase.

How does an authorization hold work?

(1) When you make a purchase, an authorization request is sent to your bank for a specific amount.

(2) The bank sets aside this amount, making it temporarily unavailable for other transactions.

(3) The actual transaction amount will only be charged when the merchant finalizes the purchase and accepted the payment.

Common misconception

One common misconception is that customers may be double-charged – once with the authorization hold and again with the actual transaction. However, the hold is temporary, and the actual charge replaces it.

What happens when an order placed with credit or debit card is canceled?

When an order is canceled before the final transaction occurs, buyers should rest assured that the authorized amount will be fully restored by the bank. This restoration process essentially erases the authorization hold, making it as if the transaction never took place.

Why does it take days for the bank to restore the account balance after cancelling order?

The delay in restoring the account balance is often due to the processing times of the involved parties (bank and payment network). Banks have internal processes for handling transactions and may take a few days to update balances.

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