What is authorize and capture?

For many merchants, the difference between authorization and capturing payments can prove puzzling. But it’s important to know. This process can safeguard your business from costly chargebacks and help protect your customers. 

How? Don’t worry – this page will explain everything you need to know about authorize and capture, demonstrating the process while giving real-life examples. We’ll also show you how Checkout.com can help your business authorize payments more efficiently.

What does authorize and capture mean?

In simple terms, authorization and capture are two steps in a transaction. First, authorization checks if the cardholder has permission to use the card and the account has enough money. Then capture allocates the transaction amount to be sent to the merchant. Both steps are necessary, and authorization always comes before capture. Sometimes, there might be delays between these two steps.

Authorization happens when a seller requests payment from a customer's card at the time of purchase, whether online or in person. During this step, the payment system checks with the customer's bank to make sure there's enough money and the account is in good standing. If everything checks out, the transaction amount is temporarily set aside. This pre-authorization confirms the payment method is valid without actually charging the account, which helps prevent expensive chargeback disputes.

Capturing payments is when the transaction is finalized. The money is deducted from the customer's account and transferred to the merchant's account. This changes the transaction status from pending to complete.

How does authorize and capture work?

When it comes to understanding authorization rates and how they can help your business, you ought to know how the auth and capture process works…

Issue a payment

This is when your business asks a customer to pay for a product or service, whether it’s online or in a physical store. If your business has the tools to handle authorize and capture transactions, this will be seamless at the point of sale. 

With Checkout.com, you can enable pre-authorization and go back to capture and settle transactions, making the entire transaction process much quicker and easier.

Request authorization

After the transaction begins, your payment system will reach out to the customer's bank to set aside the funds. The length of time a transaction stays in this authorization stage may vary depending on your payment processor, so it’s important to check. 

The longest period the funds can be held is 30 days – after this time, the authorization request will expire, and a new one will be required. This step is key to secure online payment processing.

Collect funds

Once authorization is granted, your business goes ahead and takes the money from the customer's account. This is the point where the transaction is finalized. The funds are transferred from the customer's account to your account, then the transaction status changes from "pending" to "complete." Now, your business has successfully received payment for the product or service.

Authorize and capture examples

For instance, consider an ecommerce order where the merchant doesn't have the product ready to ship immediately, like with a pre-order. Here, the pre-authorization happens when the transaction is made. Once the product is ready to ship, the capture request is sent, and the credit card is charged.

Another common example is during hotel or Airbnb check-ins. When a guest arrives, an authorization-only request is used to validate their credit card. Typically, the authorized amount is higher than the final bill to cover potential additional charges. This amount is held until checkout, when the guest settles any outstanding charges. This means that the pre-authorization and actual charge happen on different days, depending on the length of the stay.

What is the difference between authorize and authorize and capture?

Authorization confirms that your customer's credit account is active, has enough funds for the transaction, and isn't subject to any fraud investigations. If the card meets these criteria, the issuing bank temporarily sets aside the funds equal to the authorization amount.

When an authorization-only transaction is sent for approval, it's forwarded to your processor. Upon approval, the transaction is usually listed in your Unsettled Transactions with a status of Authorized/Pending Capture, depending on your payment system.

In an authorization and capture transaction, the process is fully automatic. The transaction is sent to your processor for authorization and, once given the green light, it usually appears in your Unsettled Transactions with the status Captured Pending Settlement.

How long is the authorize and capture process?

The authorize and capture process typically lasts between seven and ten days, and no longer than 30 days, depending on the card brand and gateway. If an authorization isn't captured within a certain period, it will expire automatically. If you delay capturing an authorization for too long, the gateway might have already canceled it.

How can Checkout.com help you authorize payments?

High authorization rates are vital for increasing sales, revenue and customer satisfaction. But for your business to maintain and optimize those rates, you’ll likely need the data, tools and insights of a payments partner. That’s where Checkout.com can help.

We’ll empower your business to perform different payment actions, including retry payments, void payments, authorize and capture and much more. You’ll have all the help you need to minimize chargebacks and fight against credit card disputes, saving your business time and money.

For more information on how Checkout.com can help your business authorize payments, contact our team today.