What is a preauthorization charge?

A preauthorization charge is a temporary hold on a specific amount of the available balance on a credit or debit card.

This hold is used to verify that the card is active and has sufficient funds to cover a potential transaction. The card issuer sets aside the amount, but it is not immediately transferred to the business. Preauthorization's are commonly applied in cases where the final transaction amount is unknown at the time, such as at hotels or gas stations.

The purpose of the preauthorization is to ensure that the business can later charge the actual amount once it’s determined. After the final transaction is processed, the preauthorization hold is released, and the correct amount is deducted from the account. If the transaction doesn't go through, the held amount is returned to the available balance after a certain period, which varies based on the card issuer’s policies. This process is a routine method to confirm a card’s validity and its ability to handle charges.