Authorization Codes and Pending Transactions

Authorization is the term given to the process of validating funds available on a credit or debit card. It is done at the time the transaction is entered or swiped through a terminal. When you process a credit card transaction, a response comes back from the issuing bank, all in a second or two. An authorization request is either approved or declined by the issuing bank.

Authorization holds are the practice of verifying electronic transactions initiated with a debit card or credit card and holding this balance as unavailable until either the merchant clears the transaction or the hold expires. Authorization holds can fall off the account if the transaction is never captured and settled by the merchant, which in turn makes the balance available again to the card holder. An authorization can fall off from 3-8 business days after the transaction date depending on the cardholder's bank's policy.


Frequently asked questions/scenarios:

I voided the transaction but my customer is calling and saying they are still seeing the charge pending on their account.

This is because once the bank produces an approved authorization code (verifying at the time of the transaction that the funds are available) it is labeled as  ‘pending’ until the approval code falls off or the transaction is captured. When you void a transaction, there is no way for your terminal to communicate that to the issuing bank. The hold will automatically fall off between 3-8 business days depending on the bank's policy. There are cases where it can take up to two weeks to fall off, so just be aware that this is a possibility.


What if my customer needs the hold removed sooner and can’t wait up to two weeks?

Advise the cardholder that you can not remove the authorization from their account and encourage them to contact their issuing bank to request the hold be removed. If the bank responds that they are waiting on the merchant, then you may need to speak with the bank along with your customer and confirm that you do not intend to capture the transaction. Have the approval code on hand for this call.


The rule of thumb here is if you have already settled the batch the day the transaction took place and did not receive the funds, then the hold or pending amount is being held by the bank.