A card authorization, also known as authorization, is the mechanism used to corroborate that when doing an online transaction the card user details are truthful. Additionally, it verifies the card validity and the sufficiency of funds. The approval to process a transaction is granted by the issuing bank, which generates a code whose validity is constrained by the specific date and time of the day in which it was obtained.
However, card authorizations present some restrictions. To begin with, card authorizations cannot prevent fraud and consequently, they are unable to prevent chargebacks at a later stage. Simply put, they only ensure that a cardholder has the enough money in its account to cover a specific transaction and that its card has not been reported as stolen or lost at the time the approval is being granted. Consequently, a card authorization does not guarantee that the payment transaction is actually effective or that the money has already been transferred to the merchant’s account.
In other words, a card authorization is an awaiting payment transaction since no real charge is reflected on your statement at that point of the payment process.
There are three ways in which card authorizations can be granted:
The response to card authorizations can be classified in the following manner: