Alternate name: Merchant authorization
For example, if you are making a credit card purchase at the grocery store for $100, the store will place a hold for $100 with your credit card issuer. In this example, the authorized amount is $100.
How Does an Authorized Amount Work?
When you make a purchase with a debit or credit card, the merchant you are purchasing from requests authorization from the card issuer to confirm that the card you are using is active and that you have the credit limit (in the case of a credit card transaction) or funds available (in the case of a debit card transaction) to complete the purchase. After this authorization is made, your available amount to spend on your card is reduced by the authorized amount, even though the transaction has not been settled yet. The authorized amount will appear as a pending transaction in your account activity until settlement occurs. If the merchant is unable to authorize the necessary amount, the purchase will be declined. In most cases, the authorized amount is equal to the amount of your purchase, but there are some circumstances where these amounts may be different.
Types of Authorized Amounts
While most authorized amounts are equal to the actual amount of the purchase, it is common for the authorized amount in certain kinds of transactions to differ from the final purchase amount.
Restaurant Authorized Amount
When you pay with a debit or credit card at a restaurant, you review the receipt showing your subtotal and sales tax and then provide your card to the server or cashier to run your card for this amount. At this point, the restaurant does not know how much you will tip, so they may authorize the amount of your subtotal plus tax plus an additional 20% tip tolerance to ensure that your card will not be declined when you add the tip amount after your card has been run. Whether a restaurant can authorize a tip tolerance may depend on the card issuer. For example, Mastercard does not permit a tip tolerance on in-person restaurant card transactions but does permit it for card-not-present card transactions at U.S. restaurants, such as if a customer orders delivery through an app and wants to tip the driver.
Gas Station Pump Authorized Amount
When you pay with a debit or credit card at a gas station pump, there is no way for the station to know exactly how much gas you are going to pump. As a result, some gas stations may authorize an amount as high as $100 to ensure that your card will be able to cover the transaction. On the other hand, some gas stations simply authorize a nominal amount such as $1 just to ensure that your card is working.
Hotel Authorized Amount
When you check into a hotel, the hotel may not only request authorization for the amount of your room fees and taxes but also for an estimate of any incidental fees you will incur during your stay.
