Pre-authorization
DEFINITION
A pre-authorization is a request that confirms a card is valid and has sufficient funds for a specified amount by placing a temporary hold, without transferring any money until the merchant later captures the charge.
TABLE OF CONTENTS
RELATED TERMS
A pre-authorization is a request a merchant sends to a customer's card issuer to confirm that a card is valid and that the account has enough available credit or balance to cover a specified amount, without actually moving any money. The issuer places a temporary hold on that amount, reducing what the cardholder can spend elsewhere, and returns an approval code the merchant can use later to complete the charge.
Pre-authorization is a distinct step in the broader card transaction lifecycle, separate from capture, the step where a merchant actually collects the funds. A subscription platform such as Recurly can route a pre-authorization request to a customer's card issuer as part of checkout or trial signup, so a business can confirm a payment method is valid before it commits to fulfilling an order or starting a subscription. Recurly's separate authorization and capture flow is supported on gateways such as Braintree, Stripe, Adyen, PayPal Complete, Cybersource, Authorize.net, and CardConnect, while a nominal or zero-dollar verification authorization depends on whether the connected gateway supports zero-dollar authorizations.
Why pre-authorization matters for subscription businesses
Pre-authorization gives a merchant a way to check that a payment method is real and usable before committing resources to an order, a trial, or a subscription. For a subscription business, this matters most at the moment a customer signs up: confirming the card is open, has some available balance, and passes basic fraud screening reduces the odds of starting service against a card that will fail when it actually comes time to bill. Because a pre-authorization only places a hold rather than moving funds, it also lets a business avoid charging a customer during a free trial while still confirming the payment method will work once the trial converts.
Pre-authorization also matters for risk management. Address Verification Service (AVS) and Card Verification Value (CVV) checks typically run alongside an authorization request, and their results give a merchant or its payment gateway a signal about fraud risk even when the issuer technically approves the transaction. A subscription platform can use those signals to decide whether to proceed with account creation, independent of the issuer's approval. Recurly lets a site configure a site-wide AVS rule and enable or disable CVV checks, and some gateways offer more granular options, such as Cybersource's choice to run AVS on all transactions, on US and Canadian transactions only, or not at all.
How the pre-authorization process works
The merchant (or its payment gateway, on the merchant's behalf) sends an authorization request to the customer's card issuer for a specified amount.
The issuer checks whether the card is valid and whether the account has sufficient available credit or balance, and runs AVS and CVV checks where supported.
If approved, the issuer places a temporary hold on that amount and returns an approval code to the merchant. No funds move at this point.
The hold remains in place until one of three things happens: the merchant captures some or all of the held amount, the merchant voids the authorization, or the hold expires.
If the merchant captures within the valid window, the held amount (or a portion of it) converts into an actual charge that proceeds toward settlement.
If nothing is captured before the hold expires, the funds become available to the cardholder again and no money is ever collected.
Hold duration is not fixed. It typically ranges from a few days to a couple of weeks depending on the card network, the issuer, and the type of transaction, and some categories such as car rentals or hotel stays are sometimes allowed longer windows. A merchant that tries to capture after a hold has expired may find the original authorization is no longer valid, and some processors treat a late capture as a new authorization request that could be approved or declined on its own.
Pre-authorization vs authorization vs capture
Authorization is the umbrella step in a card transaction where the issuer approves or declines a request. A pre-authorization is a specific kind of authorization used to verify a card or reserve funds before the final amount is known or before goods or services are delivered. Capture is the separate, later step where the merchant actually requests settlement of some or all of the previously authorized amount, converting a hold into a real charge.
Some processors also support sale transactions, where authorization and capture happen in a single step, as opposed to auth-only transactions that require a separate capture call afterward. Pre-authorization is always the auth-only pattern: it exists specifically to separate the moment a card is verified or a hold is placed from the moment funds are actually collected.
How to use pre-authorization
Common use cases for pre-authorization include:
Card verification at signup. Confirming a card is live and has some available balance before starting a subscription, often paired with a small or zero-dollar verification authorization rather than a full charge.
Free trials. Placing a verification hold so an account is ready to bill once a trial converts, without charging the customer during the trial period itself.
Hotels and car rentals. Placing a hold to cover an estimated stay or rental cost plus incidentals, since the final amount is not known until checkout or return.
Restaurants and similar service settings. An initial hold for the estimated bill, captured for the final amount, including tip, after service is complete.
Pay-at-the-pump and similar scenarios. A hold for an estimated maximum amount, later captured for the actual amount used.
Order-to-fulfillment gaps in ecommerce. Placing a hold at order time and capturing only when an item ships, since card networks generally expect capture to follow delivery of goods or services.
Some issuers and networks support a $0 authorization used purely to confirm a card is open and valid without placing a meaningful hold on the cardholder's funds, though support for $0 auths varies by network, issuer, and processor. Where that is not available, a small nominal amount is used instead and is typically voided rather than captured.
Benefits and examples
Using pre-authorization deliberately, rather than skipping straight to a full charge, gives a subscription business several benefits:
Lower risk of billing failures. Verifying a card before relying on it for future billing catches invalid or closed cards early, before a business has committed to fulfilling an order or provisioning a service.
Cleaner trial experiences. A verification hold confirms a payment method will work at trial's end without charging the customer anything during the trial itself.
Better fraud screening. AVS and CVV results returned with the authorization give a business an extra signal to act on, independent of the issuer's approval decision.
More accurate billing for variable-cost scenarios. Holding an estimated amount and capturing the true amount later fits situations, like rentals or usage-based charges, where the final total is not known upfront.
Illustrative example: imagine a subscription business places a $0 verification authorization when a customer starts a 14-day free trial. The issuer confirms the card is valid and returns an approval code, but no hold is placed against the customer's available credit. On day 14, if the customer has not canceled, the business submits a new authorization and capture for the plan's $49 monthly rate. Because the trial only ever ran a $0 verification, the customer's card was never touched for funds until the first real charge. This example uses simplified numbers to illustrate the mechanism, not a claim about how any specific processor prices verification.
Frequently asked questions
Does a pre-authorization charge the customer? No. A pre-authorization only places a temporary hold on the customer's available credit or balance; funds are not moved until the merchant captures the transaction.
How long does a pre-authorization hold last? It varies by card network, issuer, and transaction type, typically ranging from a few days to a couple of weeks, with some categories such as car rentals or hotels sometimes allowed longer windows.
What happens if a pre-authorization is never captured? The hold expires and the funds become available to the cardholder again, and the merchant never collects any money from that authorization.
Is a pre-authorization the same as a capture? No. Pre-authorization only reserves funds and confirms a card is valid; capture is the separate step that actually requests settlement of some or all of the held amount.
Why would a subscription business use a $0 or nominal verification authorization? To confirm a payment method is valid at signup or before a free trial starts, without charging the customer or placing a meaningful hold on their available funds.
