Understanding Credit Card Pre-Authorizations

Taking a pre-authorization is not any different from running any other credit card transaction. It may vary slightly from processor to processor, so I will explain how it works at Merchant Account ca.

Online Payments
In order to do a pre-authorization through an online store you must: (i) have a credit card processor (payment gateway) that supports pre-authorizations, and (ii) a shopping cart that can send transactions to the gateway that are formatted to use a pre-authorization. This may sound complicated, but it is extremely simple.

When integrating your website to the payment gateway, you have to declare what type of transaction you want to process. If you are using a popular shopping cart software you will want to specify to run your transactions as “full authorizations” or “pre-authorizations”. It’s an account level setting, meaning whatever you choose here will impact how all of the transactions are processed through your online store.

It’s important to note that some shopping cart software may use different terminology, so they may not call it a pre-authorization. For example, in the admin panel of your shopping cart it may have an option under your payment gateway settings page to “capture” or “reserve only”. This would be a reference to run a full-authorization “capture” or pre-authorization “reserve only”.

It’s also important to note that not all shopping cart software can support pre-authorizations, although most will. It is possible that your credit card processor is capable of transacting pre-authorizations, but your shopping cart does not support it. If you have questions about this you should speak first to your credit card processor to find out if your desired shopping cart can work with the payment gateway with support for pre-authorizations. For both clarity and reassurance, just about every credit card processor must support the functionality to provide pre-authorizations, and almost all shopping carts support it as well, so it’s almost certainly just a matter of turning it on in your control panel.

One your online store is sending transactions to the payment gateway that is only half of the battle. Obviously, we are going to want to capture the funds from most of the transactions that you have processed. Capturing the funds is an easy process. Once the hold has been reserved on the funds you will login to your administrative interface (control panel) that has been provided by your credit card processor. This is the same place that you do most of your day to day merchant activities such as issue refunds or download statements. From here, you can find the transaction in question (just like searching for any other transaction) and press the “capture” button to actually capture the funds. At this point the pre-authorization is converted into a full authorization. It’s also worth mentioning that some more advanced shopping carts may let you capture the transaction through your shopping cart administrative interface, as opposed to doing it through the control panel provided to you by your credit card processor. The distinction is an important one: if your shopping cart will allow you to capture the funds through the cart that is better, because it means the order in your shopping cart records will be updated show that it has been captured. This is not a major issue, but is an advantage worth mentioning, since if you capture the funds through the control panel provided by your credit card processor it means that the cart will not know the funds have been captured and records will fall slightly out of sync.

Virtual Terminal Transactions
Taking a pre-authorization from funds captured over the phone is very easy. (So long as your chosen credit card processor provides this service – we fully support this at Merchant Accounts.ca). In the virtual terminal, on the page in which you key the credit card number there should be an option to choose what you want to do to the card: (i) authorization or (ii) pre-authorization. You simply choose pre-authorization and key in the card as normal. Once done, you have five days to pull up the transaction in your control panel and press the capture button to finalize the transaction.

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