Understanding Preauth Charges and Holds

Preauth charges and holds can be confusing, but understanding the basics can help you navigate the process. A preauth charge is a temporary hold on your funds, usually ranging from $1 to $50, depending on the merchant.

This hold is typically placed on your account for a short period, usually 3-5 business days, to verify the transaction. The exact timeframe may vary depending on the merchant and the bank.

During this time, the funds are not available for use, but you won't be charged interest on the held amount. This temporary hold is a standard practice to ensure the transaction is legitimate and to prevent potential chargebacks.

Pre-authorization is a process that places a holding charge on a customer's credit card, checking to ensure there are sufficient funds available to cover the requested amount without actually debiting the cardholder's account right then.

This temporary reserve is like giving the original merchant priority over a particular pool of cash in the customer's account.

The issuing bank verifies the customer's payment can go through, and the pre-authorization hold prevents the customer from withdrawing or spending that money elsewhere.

Pre-auths are commonly used in the travel sector, where car hire companies require a security deposit to cover damages during the rental period, and hotels request pre-authorization to ensure guests can't rack up bills they don't pay for.

In vacation rentals, pre-auth acts as a security deposit, covering damages that might be caused during the stay, just like it does for rental car companies.

Customers might also find their card pre-authorized before filling up at a self-service gas station, to ensure they can't leave with more than they're able to pay for.

Preauth offers several benefits to both merchants and customers. It provides merchant protection by securing funds in case of loss or damage, which is more secure than accepting cash deposits.

By using preauth, merchants can avoid payment processing fees until a final charge is processed. This is especially useful in situations where you need to automatically process payments before determining if you can fulfill the order.

Preauth also makes funds more accessible to customers, as the release of reserved funds is immediate, providing them with instant access to their previously earmarked money.

Here are the requirements to implement a preauth:

Implementing pre-authorizations offers several benefits, including merchant protection. This provides security and cover in situations where there might otherwise be a risk of loss or damage.

Pre-auths can also curbs payment processing fees, which is particularly useful in situations where you might wish to automatically process payments before determining whether you can actually fulfill the order.

The release of reserved funds for a pre-auth is immediate, providing customers with instant access to their previously earmarked money. This is in contrast to the method by which funds that have already been taken through a regular credit card transaction are later refunded, which can take several days.

Offering pre-auths can give customers peace of mind, which can help persuade them to buy from you, improving conversion rates on a website.

To get started with pre-authorization, you'll need to meet certain requirements. You must build an integration that can make a payment.

Setting up webhooks is also crucial. You'll need to rely on webhooks to know whether the capture succeeded, and if you're using asynchronous authorization adjustment, you'll also need to rely on webhooks for the authorization adjustment result.

To adjust the authorization and finalize the pre-authorized payment, you'll need to generate an API key. If you're using cloud-based communications, you can use the existing API key that you use for Terminal API requests.

You'll also need to implement logic on your end to decide when to use the pre-authorization flow, and to calculate the amount when you make an authorization adjustment.

Here's a quick rundown of the requirements:

The pre-authorization process can be complex, but understanding it can help you navigate the system with ease.

To start, pre-authorization is often required for scheduled care, such as inpatient admissions, outpatient services, and durable medical equipment. Your provider must request pre-authorization by calling Member Services at (855) 979-5192 as soon as possible before the procedure or service.

Pre-authorization is also required for unscheduled admissions, such as emergency room care, and must be requested within two business days. Your provider can call Member Services at (855) 979-5192 within the first two business days after the admission.

The Plan's UM Department will provide a written response within 15 days for scheduled care and within 72 hours for unscheduled admissions. If additional time is needed, they will notify you within the original timeframe.

You can check the status of your pre-authorization request by contacting your provider or Member Services. Keep in mind that verifying pre-authorization remains your responsibility.

Here's a summary of the pre-authorization process for scheduled and unscheduled admissions:

Remember, pre-authorization is crucial to avoid a benefit penalty, so make sure to request it in a timely manner.

Preauth involves setting payment requests to be handled as either a pre-authorization or a final authorization. Pre-auth is intended for use cases where you don't yet know the amount to be captured, and it allows you to increase or decrease the initially authorized amount at a later point in time.

You can set the authorization type by defining the default authorization type at the merchant account level for all card transactions, or by manually specifying authorizationTypePreAuth or authorizationTypeFinalAuth in each payment request.

Pre-auth is verified by checking that the shopper's account is valid and has sufficient funds to cover a transaction, but it doesn't debit the account. The final amount is agreed up front and the transaction will be captured in full with a final authorization.

There are two types of authorization adjustments: asynchronous and synchronous. Asynchronous adjustment requires setting up webhooks to receive updates and to know if the final amount was authorized before you capture the payment. Synchronous adjustment requires more effort to implement, but it allows you to immediately know if the final amount was authorized before you capture the payment.

You can adjust the pre-authorized amount by making an authorization adjustment request. This involves making a request to the Adyen backend directly, and there should be at least a 5 second delay between the pre-authorization and the authorization adjustment.

Adyen handles all card payment requests as final authorizations by default. You can change this setting at the merchant account level for all card transactions.

There are two main authorization types: pre-authorization and final authorization. Pre-authorization verifies a shopper's account is valid and has sufficient funds, but doesn't debit the account.

Pre-authorization is useful when you don't know the exact amount to be captured, allowing you to adjust the authorized amount later. You can increase or decrease the initially authorized amount at a later point in time.

To manually specify the authorization type, you can include either authorizationTypePreAuth or authorizationTypeFinalAuth in each payment request. This gives you more control over the authorization process.

Here are the two authorization types in a nutshell:

You can choose between asynchronous and synchronous authorization adjustments. Asynchronous adjustment is easier to implement, but it's not immediately clear if the adjustment succeeded, so you must set up webhooks to receive updates.

In asynchronous adjustment, you refer to a payment using the PSP reference received in the response to your pre-authorization request.

For synchronous adjustment, you pass an adjustAuthorisationData blob from one request to the next, to enable Adyen to keep track of the latest amount.

This requires more effort to implement, but you receive the adjustment result synchronously, immediately knowing if the final amount was authorized before capturing the payment.

Here's a comparison of the two:

If you fail to pass the blob in synchronous adjustment, the flow falls back to asynchronous adjustment, and it's no longer possible to return to synchronous adjustment for that payment.

Merchant Category Code (MCC) adjustment is a feature that allows you to adjust authorizations for specific payment methods.

To view your MCCs for each payment method, log in to your live Customer Area, switch to your merchant account, select Settings > Payment methods, and find the line for the specific payment method. The MCC column shows your MCC for that payment method.

Not all card schemes offer authorization adjustment for all MCCs. For example, American Express and Mastercard offer adjustment for all MCCs except 5542.

Here's a breakdown of the MCC codes for which authorization adjustment is available for each card scheme:

Our test environment is designed to support testing the whole authorization adjustment flow, which is a great way to ensure everything is working smoothly before going live.

You can use our POS test cards to test the pre-authorization request. This is a handy feature that allows you to simulate real-world transactions and identify any potential issues.

Discover cards have specific requirements when it comes to testing. For instance, they can be used in all environments, and are accepted for all authorization types.

Here's a quick rundown of Discover card requirements:

This information can help you plan and prepare for testing with Discover cards.

Cartes Bancaires is a type of payment card that allows for both debit and credit transactions. It's widely accepted and can be used in various environments.

One of the key features of Cartes Bancaires is its authorization type, which is all-encompassing, allowing for final and pre-auth transactions. This flexibility makes it a convenient option for users.

Cartes Bancaires has a Mastercard Category Code (MCC) that applies to all types of transactions. This MCC code is used for identification and categorization purposes.

Cartes Bancaires has a 13-day grace period for transactions, which is a relatively standard timeframe for most payment cards. This allows users to make payments within a reasonable timeframe.

Here's a summary of the key features of Cartes Bancaires:

Discover is a popular payment scheme that offers a range of features for cardholders and merchants alike. It can be used for both debit and credit transactions, and is accepted in all environments, including online and offline.

Discover has a flexible authorization type, accommodating all types of transactions. This means that merchants can use Discover for a variety of purposes, from everyday purchases to larger transactions.

One notable feature of Discover is its return window. For most transactions, the return window is 10 days. However, for certain types of transactions, such as car rentals and hotel bookings, the return window is extended to 30 days.

Here's a summary of Discover's key features:

Mastercard is a widely accepted payment method that can be used in various environments.

Domestic transactions in the US and Canada may incur a late capture fee.

Mastercard payments can be successfully captured even when the authorization has expired after seven or 30 days.

Here's a breakdown of the authorization types for Mastercard:

Visa payments have specific authorization validity periods that you should be aware of to avoid capture failures and processing integrity fees.

For Visa Electron transactions, the authorization validity period is 5 days, regardless of the environment or MCC.

In point of sale (POS) transactions, the authorization validity period for Visa is also 5 days.

Merchant-initiated transactions (MIT) for Visa have a 5-day authorization validity period, applying to specific scenarios such as ContAuth + Subscription / UnscheduledCardOnFile.

Cardholder-initiated transactions (CIT) for Visa in ecommerce environments have a 10-day authorization validity period, but can be extended to 30 days with Extended-Auth.

In ecommerce environments, CIT Visa transactions with ContAuth + CardOnFile or Subscription / UnscheduledCardOnFile also have a 10-day authorization validity period, and can be extended to 30 days with Extended-Auth.

Pre-auth transactions for Visa have varying authorization validity periods depending on the MCC, ranging from 2 hours to 30 days.

Here is a summary of the authorization validity periods for Visa:

Our test environment is designed to support the entire authorization adjustment flow.

You can test the pre-authorization request using our POS test cards.

Our POS test cards are specifically designed for this purpose.

This makes it easy to simulate real-world scenarios without any actual financial transactions taking place.