As a new (or even existing) business owner, you should know about using authorized holds for your business. This is a way to protect your revenue for an anticipated sale, or transaction that does not have a set amount when presented payment.

What Types of Businesses Use Authorized Holds

Typically, a temporary hold – also known as a pending transaction – on a credit card is used by restaurants, hotels, car rental agencies and gas stations. This is a common practice because the customer is committing to a purchase but the amount is unknown.

At the end of the meal the restaurant will process the amount prior to the customer adding a tip. For a lodging stay, a rental car or filling up the tank an authorization hold is an estimate of the final bill. This takes place when the card is presented.

When the transaction amount is undetermined, this protects the merchant.

Why Businesses Place A Temporary Hold

Businesses have to estimate the amount of a purchase if it is not a preset amount. Thus, in the examples above they are able to collect the final total due without the consumer exceeding their credit limit on purchases that may hit their card in the interim.

Experian shares some insights on their website for consumers and this is also important for merchants to understand. The customer may ask why this is done and it is important to understand exactly what is happening.

Protect Your Business

We believe in continuing education and helping our business owners to stay at the forefront of payment processing standards.

Understanding the reason behind certain settings in your merchant account is always a best practice. As prices for goods and services rise, adjustments are often needed.

Interested in adjusting or setting authorized hold limits for your business? Reach out today and discuss your business needs. As your merchant provider, TransAct Merchant Services is your advocate to help protect your revenues and your business.