What is Outstanding Authorization Amount in Credit Card?
The outstanding authorization amount in a credit card refers to the total amount of money that has been authorized for a transaction but has not yet been settled or cleared by the cardholder. This amount is often referred to as the “pending” or “authorized” amount, and it plays a crucial role in understanding the financial transactions associated with a credit card.
In simple terms, when a credit card is used to make a purchase, the merchant requests an authorization from the card issuer to ensure that the cardholder has sufficient credit available. The card issuer then sends an authorization message back to the merchant, which allows the transaction to proceed. The authorization amount is the maximum amount that the cardholder can spend on that particular transaction.
However, it is important to note that the authorization amount is not the same as the actual transaction amount. The authorization is a temporary hold on the cardholder’s available credit, and it is released once the merchant submits the final transaction details to the card issuer. This process typically takes a few days, depending on the merchant’s and card issuer’s policies.
The outstanding authorization amount can be significant, especially for large purchases or when multiple transactions are made in a short period. It is essential for cardholders to keep track of their outstanding authorization amounts to avoid exceeding their credit limit or facing unexpected fees.
Here are some key points to consider regarding the outstanding authorization amount:
1. Temporary Hold: The authorization amount is a temporary hold on the cardholder’s available credit and does not represent an actual debt.
2. Multiple Authorizations: If a cardholder makes multiple purchases in a short period, they may see several authorization amounts on their statement, which can be confusing. It is important to understand that these are separate authorizations for each transaction.
3. Authorization Release: The authorization amount is released once the merchant submits the final transaction details to the card issuer. This process can take several days, depending on the merchant’s and card issuer’s policies.
4. Impact on Credit Limit: The outstanding authorization amount can impact the cardholder’s available credit limit. It is essential to keep track of these amounts to ensure that the cardholder does not exceed their credit limit.
5. Fraud Prevention: The authorization process helps prevent fraud by ensuring that the cardholder has sufficient credit available for the transaction. If the cardholder disputes a transaction, the authorization amount can be reversed.
In conclusion, the outstanding authorization amount in a credit card is a temporary hold on the cardholder’s available credit, representing the maximum amount that can be spent on a particular transaction. It is crucial for cardholders to monitor their outstanding authorization amounts to avoid exceeding their credit limit and to ensure that they are not charged for unauthorized transactions.
