Credit Card Authorization vs Capture vs Batch Settlement
When processing payments in a hotel setting, it's important to understand the steps involved in handling guest credit cards, from securing an authorization to finalizing the transaction through settlement. These steps—authorization, capture, and batch settlement—are key to ensuring that funds are properly managed and payments are collected smoothly.
In Visual Matrix, a credit card will be charged only when a deposit is posted or when a payment is recorded on a folio or house account. Any action taken in the credit card window on the reservation screen is solely an authorization, meaning it places a hold on funds but does not result in an actual charge. The charge only occurs once the payment is posted and captured, after which the amount is officially blocked on the guest’s account. The final settlement of these charges happens during the batch settlement process.
This article will break down each part of the payment process, clarify their differences, and explain how they work together to guarantee payment is secured and finalized for every guest stay.
Authorization
Definition: Authorization is the first step in the payment process. It confirms that the guest's credit card has enough available funds to cover a specified amount, but it doesn't actually move the money. Think of it as a temporary hold on the guest's card.
Purpose: Authorization ensures the guest has enough funds available for their stay or incidental charges, but it doesn't deduct anything from their account yet. The amount is reserved, but it's still in the guest's account, and no funds have changed hands.
Example: When you first check a guest in, you may authorize their credit card for the expected total of their stay plus any incidentals. This holds that amount, but no payment has been made yet.
How It Works with Capture and Batch Settlement
Authorization: Confirms the funds are available and places a hold on them. No money moves at this stage.
Capture: Once a payment is posted to the folio (or as an advance deposit), the PMS captures the authorized amount. This blocks the funds, meaning they’re now set aside for the hotel but still haven't been transferred.
Batch Settlement: At the end of the day, during the batch settlement process, the funds from all captured transactions are transferred from the guest’s account to the hotel’s account.
Key Difference
Authorization just reserves the money to make sure it’s available.
Capture officially blocks it for the hotel.
Batch Settlement transfers the funds to the hotel.
So, authorization is the first step, capture secures the funds, and batch settlement finishes the process.
This also means that once a credit card payment is posted (either as an advance deposit or on a folio), it cannot be adjusted, overridden, or voided.
For debit cards, when an authorization is made, the bank may place an immediate hold on the funds in the guest's bank account. This reduces the guest's available balance, even though the money hasn’t officially been transferred. While it seems like a charge, the actual movement of funds only happens when the payment is captured in the system, similar to how it works with credit cards. Until that capture, the authorization is still just a hold.
The key difference with debit cards is that the guest may see the funds as unavailable even before the charge is finalized.
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