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What is a credit card authorization?

cre - dit card au - thor - i - za - tion
noun

Credit card authorization is a request for authorization of a credit card so as to complete the payment transaction in question. This ensures that the cardholder has the required financial resources or credit balance to cover the intended purchase, safeguarding the interests of both the cardholder and the merchant involved in the transaction.

How does a credit card authorization work?

To ensure that the cardholder's credit card has enough funds to cover their purchases at a store, an authorization request is necessary. When a debit or credit card user attempts to buy goods and services, the authorization request is initiated.

The authorization request is first transmitted through the merchant's acquiring bank to determine the cardholder's bank. The cardholder's bank then assesses whether the transaction with the merchant can be approved based on the available credit or funds.

Once the acquiring bank receives confirmation from the cardholder's bank that the cardholder has sufficient funds or credit, they transmit the decision, whether to approve or decline the transaction, back to the merchant. If the transaction is approved, the amount of the purchase is deducted from the cardholder's account, and the cardholder receives a receipt.