How Does Pre-Authorisation Work?

Depending on your business, pre-authorisations can be highly beneficial to your company. There are many different industries that can benefit from this, as pre-authorisations can easily reduce chargebacks and other transaction fees such as refunds.

To simply put it, pre-authorisations temporarily hold a customer’s debit or credit card for around 5 days, or until the post-authorisation comes through. Think of this as like when a cheque is waiting to be cleared, the customer can’t just spend this money somewhere else.

When are pre-authorisations used?

Pre-authorisations are used in a variety of industries, mainly in the hospitality and e-commerce sectors, in hotels for example. A pre-authorised payment in this case means that the hotel will hold the funds of the guest at the booking stage or the check-in stage. These extra funds are kept to ensure the hotel has peace of mind, that the guest will be able to pay for any additional charges they may come across.

The benefits of pre-authorisation

Enabling pre-authorisations provides many benefits for businesses and can help save money long term. The team at Axcess Merchant Services has provided our top benefits below:

• Reduces fraud and the charges that come with it

If a customer is using a fraudulent card, pre-authorisation means that the customer can’t issue a chargeback as the funds were never used.

• Avoid refund charges

Occasionally, credit card processors will charge a refund fee. Pre-authorisation means that you can completely avoid these and save money on your business.

• Improved customer satisfaction

The customer will be given peace of mind from pre-authorisation. They can become frustrated if they have paid for an item and still not receive it. By using pre-authorisation, you can ensure that payment is not taken until the item has been shipped out.

• Reduce inventory costs

Pre-authorisation means that you don’t need to process the payment unless you can ship the item out. Your company won’t receive the charges for orders that cannot be shipped.

If you want to know more about what payments solutions are best for you, contact the Axcess Merchant team and get in touch and speak to our experts today!