Stages of a card transaction.
WHAT AUTHORISATION DOES
Checks the card is valid, funds are available, and the transaction is not blocked, then reserves the amount.
WHAT IT DOES NOT DO
Move money.
WHAT AN AUTHORISATION HOLD IS
A reservation reducing available balance without debiting.
HOW LONG IT LASTS
Days, varying by card type and issuer.
WHY THAT CAUSES COMPLAINTS
Customers see funds reduced for a cancelled transaction until the hold expires.
WHAT CAPTURE DOES
Confirms the amount to be taken.
WHY IT IS SEPARATE
It allows charging after fulfilment, and for a different amount than authorised.
WHERE THAT MATTERS
Hospitality, fuel, and anything where the final amount is unknown at authorisation.
WHAT SETTLEMENT DOES
Moves funds between institutions, in batches.
WHEN IT HAPPENS
On a cycle, typically daily, with funds reaching the merchant later still.
WHAT DETERMINES THAT DELAY
The acquirer's terms, and the merchant's risk profile.
WHAT A ROLLING RESERVE IS
A proportion withheld against future chargebacks.
WHY IT EXISTS
The acquirer bears loss if the merchant cannot cover disputes.
