What is a Credit Card Authorization?

cre - dit card au - thor - i - za - tion

noun
A request to see whether a credit card is approved for use to complete a given purchase Transaction.

How Does Credit Card Authorization Work?

Authorization is necessary to check whether a card holder's Credit Card holds sufficient funds and is approved to purchase from a Merchant. An Authorization Request first emerges whenever a cardholder attempts to purchase a good or service through a debit or credit card.

The request for Authorization is first sent through the merchant's Acquiring Bank to determine the card holder's bank. When notified, the card holder's bank then determines whether the Transaction with the merchant will either be approved or declined based on the card holder's line of credit. After the Acquiring Bank clarifies whether the cardholder holds sufficient funds or credit for the Transaction, this information of whether the Transaction was declined or approved travels back through the Acquiring Bank to the Merchant. If the Transaction is approved, then the amount of the Transaction is deducted from the card holder's account and the cardholder is given Receipt.