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`Learn about the card authorization process to give your
`customers the smoothest transaction experience
`possible.
`Get started with Stripe
`Last updated on March 22 , 2023
`More resources
`Payments
`/
`Card authorization
`explained: How it
`works and what
`businesses need to
`know
`
`
`Card authorization explained: How does it work? | Stripe
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`Learn about the card authorization process to give your
`customers the smoothest transaction experience
`possible.
`Get started with Stripe
`Last updated on March 22 , 2023
`More resources
`Payments
`/
`Card authorization
`explained: How it
`works and what
`businesses need to
`know
`
`
`2/17/25, 10:06 PM
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`Introduction
`What is card authorization?
`How does card authorization work?
`What is capturing?
`What is settlement?
`What is a credit card authorization form?
`Are credit card authorization forms safe?
`What is a card authorization hold?
`Why does card authorization fail?
`Payments
`Accept payments online, in person, and around the world with a
`payments solution built for any business—from scaling startups to
`global enterprises.
`Learn more
`
`
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`If you’ve ever used a credit or debit card to make a purchase, you’ve
`been involved in the card authorization process. The same is true if
`you have a business that accepts credit and debit card payments
`from customers. There are over one billion credit card transactions
`processed worldwide every day, and all of them require authorization
`to be completed. But despite being a routine aspect of most people’s
`daily lives and a pivotal part of doing business, most people don’t
`know very much about the card authorization process.
`Card authorization is far more complicated and consequential than
`simply checking to see if a cardholder has the funds available to
`complete a purchase. This process is a powerful security measure
`that gives card issuers and businesses a routine way to screen for
`potential fraud before it turns into a successful transaction. As a
`business owner, understanding how card authorization works and
`why some authorizations fail will enable you to set up your business
`and give your customers the smoothest transaction experience
`possible.
`What’s in this article?
`Get started with Stripe
`What is card authorization?
`How does card authorization work?
`What is capturing?
`What is settlement?
`
`
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`Card authorization is approval from a credit or debit card issuer
`(usually a bank or credit union) that states the cardholder has
`sufficient funds or the available credit needed to cover the cost of a
`transaction they ’re using a card to complete.
`In one sense, the term “card authorization” can refer to the
`authorization itself, as in, “We have card authorization for this
`purchase.” It can also mean the process by which authorization is
`sought , as in, “We are in the middle of card authorization right now.”
`What is a credit card authorization form?
`Are credit card authorization forms safe?
`What is a card authorization hold?
`Why does card authorization fail?
`Security reasons
`Financial reasons
`Technical reasons
`What is card authorization?
`
`
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`Before we get into the actual process of card authorization, let ’s
`quickly run down all the key players involved. Card authorization
`involves four parties:
`Card authorization usually happens through a payment processor as
`part of the scope of services they provide for businesses. Many
`payment processors play multiple roles for businesses around
`payment processing, including serving as the business’s acquirer.
`Stripe, for example, offers payment processing for businesses, as well
`as the functionality of a business account and acquirer. An acquirer—
`also called an acquiring bank—is a bank or financial institution that
`processes credit or debit card payments on behalf of businesses,
`specifically in the context of communicating with cardholders’ banks
`—called issuers, or issuing banks—to authorize transactions.
`Here’s the process in which all these parties communicate with each
`other to approve a transaction (or not approve it):
`How does card authorization
`work?
`The customer, often referred to in this context as the cardholder
`The business
`The issuer, or issuing bank
`The acquirer, or acquiring bank
`
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`1. The customer presents a card for payment at the point of sale.
`Card authorization is required for both online and in-person
`transactions.
`2. The business’s point-of-sale (POS) software will automatically
`send a request to their payment processor or acquirer, asking
`them to authorize the transaction.
`3. The acquirer will take the request and send it over to the issuer,
`via the card network, requesting approval.
`4. The issuing bank reviews the cardholder ’s account to check for
`two things:
`To make sure the card itself is valid
`To make sure there are sufficient funds or credit
`available to cover the cost of the purchase
`5. The issuing bank will return one of two decisions to the acquiring
`bank:
`Approved with an authorization code: If everything
`looks good on the issuer ’s end—the card is valid and
`there are sufficient funds available—then the issuer
`responds to the acquirer ’s request with approval for the
`transaction to proceed. This approval will be
`accompanied by an authorization code.
`Declined with an error code: If the issuer determines
`that the transaction cannot be authorized (we’ll cover
`the possible reasons why in a minute), they will let the
`acquirer know and send an error code.
`
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`The card authorization process usually lasts just a few seconds. Think
`of the brief amount of time that lapses between when you submit a
`card for payment and when the card reader says “approved”—all the
`steps in the process outlined above took place during those few
`seconds.
`The capturing phase of the card payment process occurs when the
`business acquirer requests that authorized funds be sent over from
`the issuing account . During card authorization, the issuer confirms
`that the funds or credit necessary to cover the cost of the purchase is
`available, but the money itself doesn’t move during authorization.
`What is capturing?
`
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`That happens right after, during capturing. Payment capture can
`happen on a variable timeline, but since most card authorizations
`expire in 5–10 days, most businesses and their payment processors
`capture funds before that time.
`Settlement is when the funds from customer transactions are actually
`transferred from the cardholder ’s issuing bank to the business’s
`acquiring bank. Think of it like this:
`Here’s a real-life example to help clarify: Let ’s say you place an order
`for groceries to be delivered to your house. The app you’re using adds
`up the estimated cost of the items you selected, plus the estimated
`tax, plus tip for the driver. The app won’t know the exact total amount
`until after the order is complete, but it needs to get prior
`authorization from your card’s issuer to make sure you have enough
`available funds or credit to cover the amount . When you first place
`the order and submit your card information for payment , the app (or
`rather the app’s acquirer or payment processor) will reach out to the
`What is settlement?
`Payment authorization is when the issuer says, “Yes, those funds
`are available and approved to be used for this purchase.”
`Capture is when the business acquirer says, “OK , great , please
`send us the funds.”
`Settlement is when the funds actually move from the issuing
`account to the business account .
`
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`bank that issued your card and request authorization for the
`estimated total amount of your order, which will probably be slightly
`higher than the actual total amount . Assuming your card’s issuer
`authorizes the transaction, a hold for that amount will be placed on
`your card. After the transaction has actually been completed and the
`app knows how much the final amount of your order is, they will
`request to capture that amount . It ’s a similar process to putting down
`a credit card with a hotel reservation to cover incidental costs, having
`the hotel put a hold for a certain amount on the card, but then
`actually charging you only the amount you spent upon checkout .
`A credit card authorization form is a document that customers (or
`cardholders) fill out to grant businesses the permission to charge
`their credit card. Credit card authorization forms are more often used
`for larger purchases (think cars, computers, etc.) than they are for
`smaller, everyday items. They are also commonly used when setting
`up new subscriptions and other recurring payments. Sometimes
`credit card authorization forms are generated digitally; sometimes
`they ’re printed out . Usually, businesses will use these forms when
`they plan to actually charge the card later without the cardholder
`present .
`The information on such a form must include:
`What is a credit card
`authorization form?
`
`
`2/17/25, 10:06 PM
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`Additionally, many credit card authorization forms include some or all
`of the following information:
`Cardholder ’s name
`Card number
`Card network (Visa, Mastercard, American Express, Discover, etc.)
`Card expiration date
`Cardholder ’s billing zip code
`Business name
`Statement authorizing charges
`Cardholder ’s signature and the date they signed
`Cardholder ’s full billing address and shipping address
`Cardholder ’s phone number
`Cardholder ’s email address
`Business contact information
`Purchase amount
`Language stipulating that this approval is for a recurring payment ,
`if applicable
`Details of items or services covered by the purchase
`Customer ID, invoice, or purchase order numbers
`
`
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`The security of credit card authorization forms entirely depends on
`the protective measures taken by the business. For example, digital
`credit card authorization forms through third-party websites like
`DocuSign are rigorously engineered to be as secure as possible.
`Conversely, when you’re dealing with a printed-out template form, the
`security of sensitive information on the form depends on what the
`business does with the form—and the credit card information it
`contains—after the cardholder fills it out .
`When the card issuer reviews an authorization request for a
`transaction, if there are enough funds available to cover the cost of
`the sale, the issuer will place an authorization hold on the
`cardholder ’s account . This will reduce their available funds or credit
`by the amount of the sale in order to prevent them from potentially
`overdrawing the account before the funds from the current
`transaction are moved and sent to the business’s bank. Authorization
`holds are a helpful mechanism for preventing card fraud and
`chargebacks.
`Are credit card authorization
`forms safe?
`What is a card authorization
`hold?
`
`
`2/17/25, 10:06 PM
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`Card authorization explained: How does it work? | Stripe
`
`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`For example, if someone had $300 available on a line of credit , and
`they purchased something for $260, and there was no authorization
`hold placed on their card after that transaction was approved, it
`would be possible for them to quickly purchase something else for,
`say, $100 before the $260 from the first purchase was transferred out
`of their account . When all transactions are settled, they would be over
`their limit by $60, which isn’t an ideal situation for the issuer or the
`cardholder. Authorization holds are effectively a way for issuers to
`make sure that cardholders’ accounts immediately reflect their true
`available balance, even before all pending transactions are settled.
`Authorization holds can last anywhere from a few minutes to 31 days
`and are removed once the business receives the funds or when the
`authorization expires.
`If a card issuer declines to authorize a transaction, the reason almost
`always falls into one of the following three categories.
`The card authorization process is where any red flags related to
`potential fraud most often get raised. If the issuer finds that a card
`Why does card authorization
`fail?
`Security reasons
`
`
`2/17/25, 10:06 PM
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`
`has been marked as stolen, lost , or frozen, they will reject the
`transaction and likely trigger a deeper look into the account to see if
`there’s been other suspicious activity. Similarly, if the card is past its
`expiration date, the transaction will also not be authorized.
`One way businesses can help mitigate the occurrence of security-
`related failed authorizations is to take strong offensive measures
`against fraud overall. Stripe users have access to Stripe Radar, which
`uses machine learning to prevent fraud without blocking your real
`customers from making payments and applies Dynamic 3D Secure
`authentication to high-risk payments. Radar doesn’t require any
`additional setup or integration if you’re already using Stripe products.
`If the issuer looks at the cardholder ’s account and finds there are
`insufficient funds or available credit , they will decline authorization
`and reject the transaction. Some issuers offer overdraft protection
`that allows transactions to proceed even when sufficient funds are
`not available, but this feature usually comes with a fee and is not
`available on all accounts. In most cases, insufficient funds will stop a
`transaction from being authorized.
`There are also technical reasons why a payment authorization might
`fail. This is more common with online purchases, where there’s more
`room for user error while inputting payment information. Online
`Financial reasons
`Technical reasons
`
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`transactions tend to be more sensitive to technical errors because of
`the increased risk of fraud with these card-not-present (CNP)
`transactions. In fact , online debit and credit card transactions are
`authorized 10% less frequently than in-person, card-present (CP)
`transactions. If anything about the payment information submitted
`for an online purchase is incorrect or suspicious, it ’s likely to get
`rejected by the issuer.
`Sometimes the business and customer are given a specific reason
`why a rejected charge was declined, and sometimes it ’s simply not
`authorized. The amount of information that accompanies a rejected
`authorization depends on various factors, such as who the card
`issuer is, who the business’s payment processor is, what kind of POS
`system they have, and whether the transaction was online or in
`person.
`Card authorization can fail for a range of reasons, no matter where
`they ’re processed, but there are steps businesses can take to
`improve their authorization rate. Having your payments supported by
`Stripe is a strong step in that direction: The Stripe platform provides
`intelligent acquiring functionality with direct integrations to major
`card networks globally, reducing latency and improving reliability on
`card transactions. Stripe users have access to issuer-level insights
`and enhanced data fields, like raw response codes, to give you
`greater visibility into what ’s going on with your payments. With its
`modern acquiring platform, Stripe continually learns from billions of
`data points to help optimize routing and messaging on each
`transaction—it ’s a payments infrastructure itself that ’s primed to
`work in favor of better authorization rates. Stripe solutions have
`generated billions in revenue for businesses by preventing legitimate
`
`
`2/17/25, 10:06 PM
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`
`payments from being blocked. Read more here for details on how
`Stripe works for businesses to optimize authorizations.
`The content in this article is for general information and
`education purposes only and should not be construed as
`legal or tax advice. Stripe does not warrant or guarantee
`the accurateness, completeness, adequacy, or currency
`of the information in the article. You should seek the
`advice of a competent attorney or accountant licensed to
`practice in your jurisdiction for advice on your particular
`situation.
`See all payments articles
`More articles
`How to accept credit card and debit card payments from customers
`online and in person
`What is an issuer? What issuing banks do for businesses
`
`
`2/17/25, 10:06 PM
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`Card authorization explained: How does it work? | Stripe
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`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
`
`16/20
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`
`How to accept in-person payments using only an Android device
`
`
`2/17/25, 10:06 PM
`
`Card authorization explained: How does it work? | Stripe
`
`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
`
`17/20
`
`Patent Owner Exhibit 2033, Page 17 of 20
`
`Create an account and start accepting payments—no
`contracts or banking details required. Or, contact us
`to design a custom package for your business.
`Start now
`Contact sales
`Accept payments online, in
`person, and around the world
`with a payments solution built
`for any business.
`Explore Payments
`Find a guide to integrate
`Stripe's payments APIs.
`Explore the docs
`Ready to get started?
`Payments
`Payments docs
`
`
`2/17/25, 10:06 PM
`
`Card authorization explained: How does it work? | Stripe
`
`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
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`18/20
`
`Patent Owner Exhibit 2033, Page 18 of 20
`
`United
`States
`(English)
`Products &
`pricing
`Pricing
`Atlas
`Billing
`Capital
`Checkout
`Climate
`Connect
`Data
`Pipeline
`Elements
`Financial
`Connections
`Identity
`Invoicing
`Issuing
`Link
`Payments
`Payment
`Links
`Payouts
`Radar
`Solutions
`Startups
`Enterprises
`SaaS
`Retail
`Platforms
`Ecommerce
`Marketplaces
`Crypto
`Creator
`economy
`Embedded
`finance
`Global
`businesses
`Finance
`automation
`Integrations &
`custom
`solutions
`Stripe App
`Marketplace
`Partner
`ecosystem
`Resources
`Guides
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`stories
`Blog
`Annual
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`Privacy & terms
`Prohibited &
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`businesses
`Licenses
`Sitemap
`Cookie settings
`Your privacy
`choices
`Company
`Jobs
`Newsroom
`Stripe Press
`Support
`Contact sales
`
`
`2/17/25, 10:06 PM
`
`Card authorization explained: How does it work? | Stripe
`
`https://stripe.com/resources/more/card-authorization-explained#what-is-card authorization
`
`19/20
`
`Patent Owner Exhibit 2033, Page 19 of 20
`
`Revenue
`Recognition
`Sigma
`Tax
`Terminal
`Treasury
`Professional
`services
`Developers
`Documentation
`API reference
`API status
`API changelog
`Stripe Apps
`Support center
`Support plans
`CA residents:
`+1 888 926 2289
`© 2025
`Stripe, Inc.
`
`
`2/17/25, 10:06 PM
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`
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`
`
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