Understanding Credit Card Pre-Authorizations: Your Guide to Holds, Limits, and What to Expect

When we talk about a pre-authorization amount on a credit card, it's a critical concept in how many businesses handle transactions where the final cost isn't fixed at the outset.

Here's a detailed look:

What a Credit Card Pre-Authorization Is (and Isn't):

• It's a Temporary Hold on Your Credit Limit: A pre-authorization is not an actual charge that appears on your statement as a completed transaction. Instead, your credit card issuer (your bank) places a temporary hold on a specific portion of your available credit limit. This means that amount of your credit becomes temporarily unavailable for other purchases.
• It Verifies Card Validity and Funds: The primary purpose from the merchant's perspective is to confirm that your credit card is legitimate, active, and has sufficient credit available to cover a potential future charge up to the pre-authorized amount.
• No Money Leaves Your Account (Yet): Unlike a debit card pre-authorization which directly impacts your bank account balance, a credit card pre-authorization only affects your available credit limit. No money is actually debited from your bank account at this stage.

How It Works (Step-by-Step for Credit Cards):

1. Initial Request: When you present your credit card for a service where the final amount is unknown (e.g., checking into a hotel, renting a car, starting to pump gas, initiating an EV charge), the merchant sends an "authorization request" to your credit card issuer for an estimated amount.
2. Credit Limit Reduced: If your issuer approves the request, they place a hold on that estimated amount. This reduces your available credit limit by the pre-authorized amount. You'll often see this as a "pending" transaction on your online credit card statement.
3. Service Provided: You then proceed with the service (stay at the hotel, drive the car, fill your tank, charge your EV).
4. Final Transaction Processed (Settlement): Once the actual, final cost of the service is known (e.g., hotel checkout, car return, completed gas fill/EV charge), the merchant sends a "settlement" request for the precise amount you owe.
5. Hold is Released, Actual Charge Appears:
   • The pre-authorization hold is then removed.
   • The actual, final charge appears on your credit card statement.
   • If the actual charge was less than the pre-authorized amount, the difference in the held amount is released back to your available credit limit.
   • If the transaction was cancelled or didn't occur the entire pre-authorization hold will eventually expire and the credit will become available again.

Electric Vehicle (EV) Charging Stations (like SWTCH): Similar to gas stations, an EV charging network with credit card reader enabled will place a pre-authorization hold of $60 - $100 to ensure the card is valid and can cover a session, as the final time period or kWh consumed (and thus the cost) isn't known until the charge is complete.

Impact on Your Credit Card:

• Reduces Available Credit: The most immediate impact is that the pre-authorized amount temporarily reduces your available credit limit. If you have a low credit limit, multiple pre-authorizations (e.g., a hotel, a car rental, and an EV charge on the same trip) could deplete your available credit, potentially leading to declined transactions for other purchases.
• Not a Debt: Since it's not a settled charge, it doesn't immediately create debt or impact your credit utilization ratio (though the reduced available credit can be a factor if you're close to your limit).
• Hold Expiration: Pre-authorization holds are temporary. They typically expire after a few days (often 3-10 days, but sometimes longer, up to 30 days.) The exact duration depends on the card network (Visa, Mastercard, etc.) and your issuing bank's policies.

What to do if a Pre-Authorization Doesn't Clear:

If a pre-authorization hold remains on your credit card for more than 30 days after a transaction has concluded or been canceled, you can contact SWTCH or your credit card issuer for further investigation.

Charging as a guest

If a user requests a receipt or transaction record for a session completed as a guest (without a registered account), a temporary hold may appear on the user's card, and the actual charge will be less than the hold amount. The hold is released automatically, typically within 7–10 business days, and the actual charge can be confirmed by checking the user's bank statement.