A preauthorisation charge is a temporary hold on a specific amount of the available balance on a credit or debit card. This charge checks that the card is valid and has sufficient funds to cover the transaction. The amount is set aside by the card issuer but not actually transferred to the business. This charge is typically used in situations where the final amount is not known at the time of the initial transaction, such as at hotels or gas stations.
The preauthorisation ensures that the business can later charge the actual transaction amount. Once the final amount is assessed and charged, the preauthorisation hold is released, and the actual amount is deducted from the account. If the purchase is not completed, the preauthorisation amount is released back into the card’s available balance after a certain period, which can vary depending on the card issuer’s policies.
This process is a standard practice to verify that a card is active and can cover potential charges. According to a report from the Federal Reserve, 35% of all payments in 2025 were made with credit cards, emphasising the importance for businesses to manage preauthorisation charges diligently to ensure customer transactions are covered.
Below, we’ll discuss what businesses need to know about preauthorisation holds. Although these charges may seem like a small detail, they come with large implications for the efficiency of the payment experience and the security of payments.
What's in this article?
- How long does a preauthorisation charge last?
- How preauthorisation charges work
- Preauthorisation vs. pending charge
- How preauthorisations affect credit cards vs. debit cards
- Advantages of using preauthorisation charges for businesses
- What types of businesses typically use preauthorisation charges?
- How Stripe Payments can help
How long does a pre-authorisation charge last?
A pre-authorisation charge on a credit or debit card typically lasts for about five to seven days, but this duration can vary depending on the card issuer's policies and the type of transaction. Some banks may keep the hold for up to 14 days. In the case of certain types of business, such as hotels and car hire companies, the hold might remain for an even longer period – potentially up to 30 days.
It’s important to know that if the actual transaction is processed before the hold period ends, the preauthorisation hold is removed and replaced by the actual charge. If the transaction isn’t completed, or if it’s less than the preauthorised amount, the hold is released. The unused funds then become available again in the cardholder’s account. This timeline for the release of funds can also depend on both the business’s and the card issuer’s processing times.
How preauthorisation charges work
Pre-authorisation charges work as a method for businesses to verify that a card is active and has sufficient funds for a transaction – especially in cases where the total amount is not immediately known. Here's how the process typically works:
The business initiates a temporary hold: When you use your card for a transaction where the final amount isn’t known up-front, the business will initiate a preauthorisation. This is a temporary hold of a certain amount on your card.
The funds are deducted from your bank balance: The preauthorisation amount is not an actual charge but a temporary hold. This amount is deducted from your available credit, reserving these funds for the potential future transaction. The actual account limit doesn’t decrease at this stage. The length of time the preauthorisation hold remains on your account can vary. It depends on the business’s policies and the card issuer’s practices. It usually ranges from a few days to a couple of weeks.
The business posts the final transaction amount: Once the final amount of your purchase is known (for example, when you check out of a hotel), the business will complete the transaction. The preauthorisation hold is then replaced by the actual charge of the final amount. This so-called preauthorisation completion is converting the temporary hold into a final, settled charge.
Unused funds are returned to your account: If the actual transaction amount is less than the preauthorised amount, or if the transaction is cancelled, the hold on the unused funds is released. This means the preauthorised amount (or the remaining part of it) becomes available again in your account.
Cardholders should monitor pre-authorisation holds because they temporarily lower the spending power of the card, which might affect future purchases. Businesses put these holds in place as a security step, especially when they're delivering services or products before the final charge. It's a way for businesses to safeguard against payment uncertainties.
Preauthorisation vs. pending charge
Because both terms represent transaction states where money has not officially changed hands, consumers and businesses can confuse preauthorisations with pending charges. While they are closely related parts of the payment lifecycle, they serve different functional roles:
Preauthorisation: A preauthorisation is a command initiated by the business that instructs the cardholder's bank to hold a specific amount of credit or cash. This decreases how much the cardholder can spend but does not alter their actual account limit or generate a line item on a final billing statement.
Pending charge: A pending charge is a broader, customer-facing banking status displayed on online statements. It indicates that a transaction is undergoing review by the card network and has not yet been formally settled or captured.
How preauthorisations affect credit cards vs. debit cards
Preauthorisation charges on credit cards enable businesses to validate the card and ensure that the necessary funds are available. Specific to credit card payments, preauthorisations are a check against the cardholder’s credit limit rather than the balance in their bank account, as is the case with debit cards. This is an important distinction because it means preauthorisations reduce the amount the cardholder can subsequently spend, but they do not impact the actual funds in a bank account until the transaction is finalised.
While the back-end communication between a business and a card issuer looks identical for every transaction, a preauthorisation hold impacts a customer's personal finances differently depending on the type of card used.
Where the funds are held: When a preauthorisation is applied to a credit card, the cardholder's issuing bank places a temporary block against their open line of credit. Conversely, when a hold hits a debit card, the bank separates cash directly within the consumer's primary checking account, locking those funds away from other use.
How the hold affects spending: This distinction dictates a customer's immediate spending power. A credit card hold simply reduces the cardholder’s available credit limit for subsequent purchases, leaving their bank account untouched. A debit card hold, however, instantly lowers the customer's usable cash balance. If a business places a large debit hold, it can unintentionally trigger immediate insufficient funds alerts.
What happens when the charge posts or expires: Once a transaction is finalised, the merchant sends a capture command for the actual balance due. If the final bill is less than the preauthorised hold, the remaining credit limit or cash balance is released back to the user. If a business fails to finalise the transaction entirely, the hold will eventually drop off automatically. However, the timing varies heavily by card type: credit card holds are usually clear within three to seven working days, whereas debit card holds can occasionally take up to several weeks to process back into a checking account balance.
Advantages of using preauthorisation charges for businesses
Preauthorisations provide a financial safety net for both businesses and customers. For businesses, they’re a way to make sure customers have the funds or credit they need before businesses commit to providing a service. This step is a safeguard against payment disputes and chargebacks, and it is especially handy in industries such as hospitality or car rentals where the full cost might not be known at the beginning. Locking in funds early helps you avoid surprises and makes sure that payments will land in your account as expected.
Protect against unexpected final charges: Preauthorisations give businesses the ability to reserve an amount that covers potential costs. This certifies that businesses are compensated for the services they provide and also streamlines accounting and financial planning, allowing for more accurate forecasting and budgeting.
Set clear expectations for customers up-front: Preauthorisations can also improve the customer experience by allowing businesses to focus on delivering the best customer service without the looming concern of payment follow-ups. Best practices for communicating preauthorisation holds to customers include using clear language and providing an estimated time frame.
Gives customers flexibility: Preauthorisations can be advantageous for customers because they provide a way to assure service providers without making an immediate payment. It also allows for a check on the account’s standing without the immediate financial impact of a complete transaction, helping to prevent overspending.
Streamline billing and reservation management: Businesses can reduce the time spent on billing and payment collection through the use of preauthorisations. Since they simplify the transaction process by guaranteeing funds are available before providing services, they can provide a more organised way to manage reservations and bookings.
Simplifies budget control and financial planning: Businesses can forecast their receivables more accurately, while customers can monitor their spending and available credit or funds more closely. The process provides a layer of financial oversight that can contribute to better budgeting and financial planning.
The main risks of relying on preauthorisation include missed revenue, customer friction, and complicated financial management. Failing to capture or release holds promptly can lead to expired authorisations, failed payments, and frustrated customers.
What types of business typically use pre-authorisation charges?
Pre-authorisation charges are commonly used by businesses where the final amount of a transaction is not known at the start, or where there's a gap between the initiation of a service and its completion. Here are some examples:
Hotels and accommodations: These establishments often use preauthorisations to cover potential incidental expenses or damages by securing an amount on a guest’s credit card.
Car rental services: Preauthorisations are used to hold an amount that covers the rental fee, insurance, and a security deposit for possible damages.
Gas stations: For payments at the pump, a preauthorisation is used to verify that the card has enough funds to cover the fuel purchase.
Restaurants: Especially in situations where patrons open a tab, preauthorisations are used to confirm the payment method before the final bill is tallied.
Retail stores with high-value items: Some retailers may preauthorise a purchase amount to make sure that funds are available before processing expensive transactions.
Online services and subscriptions: Companies offering trial periods may preauthorise a small amount to verify the payment method, which will be charged if the subscription continues past the trial.
Travel agencies and airlines: When booking travel, preauthorisations are used to hold funds for ticket purchases and potential fees for changes or cancellations.
Rental services: This can include equipment rentals, furniture rentals, or any service where the final cost might depend on the return condition of the item rented.
Preauthorisation can be adapted to various business models, particularly those that involve reservations, rentals, or services that are variable.
How Stripe Payments can help
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The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.