Authorization hold is a common practice in the financial industry that can sometimes cause confusion among buyers. This page aims to shed light on what an authorization hold is, why it exists, and why it may take several days for a bank to restore the account balance after cancelling an order. You should however ultimately check with your bank and be familiar with their terms and conditions.
Here's a video from Kidmoto Technologies to better explain regarding Credit Card Pre-authorization:
What is an authorization hold?
An authorization hold is a temporary deduction from your available credit or account balance. It occurs when a merchant requests approval from your bank for a specific amount, often before the actual transaction takes place.
Why is authorization hold required?
Authorization hold ensures that a buyer has sufficient funds or credit to cover the anticipated purchase.
How does an authorization hold work?
(1) When you make a purchase, an authorization request is sent to your bank for a specific amount.
(2) The bank sets aside this amount, making it temporarily unavailable for other transactions.
(3) The actual transaction amount will only be charged when the merchant finalizes the purchase and accepted the payment.
Common misconception
One common misconception is that customers may be double-charged – once with the authorization hold and again with the actual transaction. However, the hold is temporary, and the actual charge replaces it.
What happens when an order placed with credit or debit card is cancelled?
When an order is cancelled before the final transaction occurs, buyers should rest assured that the authorized amount will be fully restored by the bank. This restoration process essentially erases the authorization hold, making it as if the transaction never took place.
Why does it take days for the bank to restore the bank account balance after cancelling order?
The delay in restoring the bank account balance is often due to the processing times of the banks as banks typically have to adhere to their internal processes for handling transactions and may take a few days to update the balances.