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Credit Card Authorizations
On making a credit card payment, the merchant contacts the transaction processor which in turn contacts your card issuer to confirm the available credit is sufficient to cover the expense. All this occurs in seconds.
Once the transaction is approved by the card issuer, an authorization is created in your account. The implication of this is that although the merchant hasn't been paid the money yet, your available credit is reduced by the authorized amount. It takes about one to five days for the charge to be completed when the card issuer receives the transaction slip signed by you, and the funds are transferred to the merchant's account. In case the slip is not received for a certain period of time, the authorization expires and the amount on hold will be available again.
Confusion may crop up in cases where the total transaction amount is not pre-determined. A good example is hiring a car where you are free to extend the rental period or the number of miles. Here the rental agency will request authorization for an amount they estimate will be sufficient to cover the entire bill. Credit card info.com reports:
When you present your credit card as payment (either physically or by submitting the number by snail-mail), the merchant will typically contact their transaction processor, which will then contact the issuer of your card to confirm that there is sufficient available credit to cover the purchase (or cash advance.) This can be done in a matter of seconds as you standing at a store check-out counter.
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