How do Pre-Auths work and when do I use them?

A Pre-Authorization is a temporary hold put on a credit card. Pre-Authorizations are different from Purchase transactions in that the cardholder doesn’t actually get charged, but the funds won’t be available for them to spend anywhere else. 

You can charge the cardholder at a later time by processing a Pre-Authorization Completion (also known as “capturing” the payment) within seven business days. 

Pre-Authorizations can help mitigate fraud, avoiding certain costs and fees, and improve customer satisfaction.

Must know:

  • You can process Pre-Authorizations through the web terminal, checkout form, or the Payments API

Why Pre-Authorizations? 

Mitigate fraud and prevent chargebacks

The Pre-Authorization period gives you a chance to review the transaction and look for signs of fraud, prior to capturing the funds.  

Avoid certain costs and fees. 

Card networks don’t typically charge the credit card discount rate on Pre-Authorizations until the payment is captured through a Pre-Authorization Completion. 

Holds also prevent the need to process refunds. For example, if an order is cancelled, you can avoid the task of processing a refund and even the flat transaction fee associated with processing a refund. 

Improve your customers’ experience

If an order is delayed or is under review, your customers can rest easy knowing their credit cards won’t be charged until the order is ready and shipped. 

Good to know:

  • The Pre-Authorization doesn’t show up on the cardholder’s credit card statement until you capture the payment through a Pre-Authorization Completion.
  • For each Pre-Authorization, you can process multiple Pre-Authorization Completions, up to the initially authorized amount.
  • Bambora doesn’t have control over how long the cardholder’s bank will hold the funds. On average, most banks hold the funds for 5-10 business days, but the duration varies from bank to bank.
  • With the above in mind: 
    • We can’t check if the bank still has the funds on hold at any given time.
    • It’s not possible to reverse a Pre-Authorization at the bank level. 
    • The cardholder has to reach out to their bank to look into the above.
  • Regardless of whether the cardholder’s bank has released the hold, your Bambora account leaves the Pre-Authorization transaction open for you to process a Pre-Authorization Completion for seven business days. For some account types, you may be able to cancel the Pre-Authorization in the Bambora system through a $0.00 Pre-Authorization Completion. 
  • If you have card validation enabled for Secure Payment Profiles, then a Pre-Authorization is put through automatically once you add a new card to a payment profile as a way to validate the card.
  • You can’t leave a Pre-Authorization open, which means you have to complete the transaction by capturing payment through a Pre-Authorization Completion or cancelling in the Bambora system by processing a $0.00 Pre-Authorization Completion. Please note, not all processors allow cancellations of Pre-Authorizations.
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