Understanding pre-authorisation

What is a pre-authorisation?

A pre-authorisation transaction is not a payment, it is used by a merchant (you) to temporarily hold a cardholder’s funds before providing the product or service where the exact amount will only be known after the product or service is delivered. For example, hotel bookings and check-ins where the final bill might include additional charges or car rentals with extra fees when the car is returned. (Note: You must be approved for this functionality, and it is only available for certain transaction types). Payment only occurs if you later complete the transaction within the required timeframe.

How does it work?

A pre-authorisation transaction places a temporary hold on funds on a cardholder’s Visa or Mastercard credit or debit card for a specific amount. The period for which funds are held is at the discretion of the card issuer but is usually between three to seven days after which these will drop off.

Pre-authorisations are not included in the daily settlement to you and usually appears as “pending” transactions on the cardholder’s online banking apps or systems. 

To receive funds, you must perform a completion transaction within five days for Visa and seven days for Mastercard (merchants in industries offering rentals (for example, cars, furniture, equipment, etc. and lodging have longer periods)). A pre-authorisation transaction supplies you with an authorisation number that must be recorded for the processing of the final transaction. Refer to the pre-authorisations timeframes table.

If a completion is processed outside the number of days prescribed by Mastercard or Visa, you may lose chargeback protection and be responsible for the transaction if it is disputed by the cardholder. The completion amount may vary from the pre-authorisation amount (for example, up to a specific percentage) in certain circumstances.

To help you with performing a completion, pre-authorisations are stored for 30 days on the terminal. However, please note this does not mean the funds are held by the card issuer for 30 days or that you have chargeback protection for 30 days. You will still be required to process the completion within the timeframes required by Mastercard or Visa to avoid liability for cardholder disputes. For clarity, pre-authorisation creates no guarantee of settlement and confers only a limited opportunity to complete a transaction within prescribed parameters.

If the pre-authorisation is no longer needed, you can remove the hold on cardholder funds immediately by using a pre-authorisation cancellation. Please note you should not cancel a pre-authorisation you intend to complete (i.e. process a completion). Processing a cancellation will remove the “pending” label on a cardholder’s online banking app or system.

To activate pre-authorisation on our QT850 Terminal

Important: Pre-authorisation must be enabled first on your terminal to be able to activate.

See pre-authorisation completion on EFTPOS terminal.

To activate pre-authorisation on our Move 5000 Terminal

Important: Pre-authorisation must be enabled first on your terminal to be able to activate.

See pre-authorisation completion on EFTPOS terminal.

Pre-authorisation timeframes