Pre-authorization reserves funds on a cardholder's account without transferring money, while capture completes the transaction by actually moving the reserved funds to the merchant.
Why It Matters
The two-phase model allows merchants to validate orders, check inventory, and prevent overcharging while maintaining customer trust through transparent billing practices.
How It Works in Practice
- 1Authorize funds by sending card details and transaction amount to the payment processor for approval
- 2Validate the order by checking inventory availability, fraud scores, and shipping addresses
- 3Capture the authorized amount by submitting a settlement request to actually transfer funds
- 4Process partial captures for split shipments or canceled items within the original authorization amount
Common Pitfalls
PCI DSS compliance requires secure storage of authorization codes and transaction tokens between auth and capture phases
Key Metrics
| Metric | Formula |
|---|---|
| Authorization Success Rate | Successful authorizations / Total authorization attempts × 100 |
| Capture Rate | Successful captures / Total capture attempts × 100 |
| Auth-to-Capture Time | Average time between authorization timestamp and capture timestamp |
Related Terms
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