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Debit and Credit Card Preauthorization

Know all about preauthorization on card payments and how it benefits customers and businesses receiving online payments

What is Preauthorization on Card Payments?

Preauthorization (also card authorization, authorization hold or preauth) is a facility that payment gateways such as Cashfree offer to online merchants to temporarily block some amount of funds when a customer places an order. If the order is modified or canceled within a specific time frame (typically 7-9 days), the merchant can mark the transaction void and the amount goes back to the consumer’s original payment source.

How Does Preauthorization Work?

Let’s take an example of a transaction where a customer has made payment using a credit card and now wants to cancel the order and get the refund.

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Benefits of Preauthorization for Merchants

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    Assurance that enough funds are maintained by the customer

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    No transaction cost (TDR) paid on canceled orders or where refund is requested as the amount goes directly from payment gateway to the customer

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    Improved customer experience since customers get the refund instantly or within 1-2 hours

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    Improvement in operational efficiency since the procedure to update refund request in the system and then doing outward payments is avoided

Did you know?
A chargeback can not be issued by a cardholder if the funds have not been captured. This means that online merchants using preauthorization can process transactions without having to worry about chargebacks if using stolen cards.
Use Case

Enable Preauthorization on checkout

Enable preauthorization on checkout and give instant refunds to customers while saving on transaction charges

Available on

Debit Card & Credit Card

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