Authorizing a credit card vs actually charging the card

Authorizing a credit card vs actually charging the card


Authorizing and charging a credit card are two distinct processes in the context of a transaction. Authorization is a preliminary step to check and reserve funds, while charging involves the actual transfer of funds from the cardholder to the merchant for the specific goods or services provided.
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 a house account. Any action taken in the credit card window on the reservation screen is solely an authorization and does not result in an actual charge.

Authorization

Purpose: Authorization is the initial step where the merchant checks with the credit card issuer to ensure that the card is valid and has sufficient funds or credit available for the transaction.
Temporary Hold: During authorization, a temporary hold, or "authorization hold," is placed on the funds in the cardholder's account. This is not an actual charge but a reserved amount that ensures the availability of funds for the potential transaction.
Duration: The authorization hold is typically valid for a short period, often ranging from a few days to a week, depending on the policies of the merchant and the credit card issuer.
Common Scenarios: Authorization is commonly used in scenarios like hotel reservations, car rentals, and similar situations where the final amount may not be known at the time of the initial transaction.

Charge (or Capture)

Purpose: Charging a credit card, also known as capturing the transaction, occurs when the merchant converts the authorization into an actual charge to the cardholder's account.
Amount: The charge is for the specific amount of the goods or services provided by the merchant.
Timing: The charge is typically applied at the time of the transaction (e.g., during checkout for online purchases) or upon completion of a service (e.g., at the end of a hotel stay).
Result: Once the charge is applied, the funds are transferred from the cardholder's account to the merchant's account.


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