Ask Finder: What is card pre-authorisation?

Posted: 7 August 2019 7:01 am

A woman waiting at the airport and looking at a tablet.

Also known as an authorisation hold, this type of transaction puts a temporary limit on your card's available funds.

Dear Finder,
I just booked a hotel for my next trip and the confirmation email said to be aware that I'll need a credit card for pre-authorisation when I check-in. I'm not a frequent traveller and I have no idea what this means. Can you please explain?

A pre-authorisation is a temporary transaction where a set amount of funds from your credit card or debit card is put on hold.

For example, if your hotel puts a $100 pre-authorisation on your credit card, you won't be able to spend that $100 until the hold on your account ends.

Hotels typically use pre-authorisation as a form of security during your stay – in case you decide to sample items from the mini-bar, order room service or have additional charges for anything else you do there.

The amount of money that's used for a hold varies, but is usually between $1 and $150 at most hotels. This is one of the main reasons hotels ask for your debit or credit card when you check-in (even if the hotel has been booked through your work).

You could also come across pre-authorisations for transport bookings and payments, including car hire, trains, buses and even some airfares.

As well as travel-related bookings, there are also many direct debit services and online companies that use pre-authorisations – including Stan, PayPal and EzyPay.

When you register a new card or payment method with one of these services, you'll typically see a small pre-authorisation on your account. This helps the company confirm that your card is valid so that it can be charged for any transactions or subscriptions you set up.

As a pre-authorisation is not technically a charge, you will only see it in your "pending" transactions.

If you're using a credit card, a pre-authorisation won't affect your statement balance or attract interest charges while those funds are held. This also means you won't earn any points for an authorisation hold that's placed on a reward or frequent flyer credit card (although, you could still earn points for using it to pay for the booking).

When does a pre-authorisation end?

In most cases, the funds from a pre-authorisation will be released within 1-14 days. However, an authorisation hold can technically last up to 30 days if it is not cancelled or completed before that time.

If you want to know when your pre-authorised funds will be released, get in touch with the business that set up the authorisation hold to check the status of your account or booking.

Banks and credit card providers usually recommend that you do this before contacting them, as the business may need to cancel or complete the hold before you can access your funds again.

Another key detail to remember if you're travelling and making a lot of bookings with the same card is to regularly check your account balance so that you know how much is held for pre-authorisations and how much you have available to spend.

Alternatively, you could use one card for payments that attract an authorisation hold and another card for your everyday spending, so that you can make purchases without worrying about the pre-authorised funds affecting your limit.

Ask Finder is a regular column where Finder's expert writers answer your questions. All rates and fees are correct at the time of publication and we only give general advice.

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