Understanding the Difference Between Sales and Authorizations
When accepting credit card payments, it’s important to understand the difference between a Sale and an Authorization. Knowing how each transaction type works can help you manage your payments effectively, reduce declined transactions, and avoid confusion when reconciling batches or reports.
What Is a Sale?
A Sale (also called a Purchase) is a transaction that immediately charges the customer's card and captures the funds. It is the most commonly used transaction type in retail and online environments.
Key Characteristics of a Sale:
- Authorization and capture happen simultaneously – the funds are both approved and immediately queued for deposit.
- Funds are typically transferred to your business account within 1–2 business days, depending on your processor.
- Once processed, the transaction shows up on the customer’s statement as a completed charge.
- Sales are finalized and appear in your settlement batch.
When to Use a Sale:
- You’re providing the goods or services immediately (e.g., in-store purchases, same-day services).
- You want to receive the funds quickly without taking extra steps.
What Is an Authorization?
An Authorization is a temporary hold on a customer’s credit or debit card for a specific amount. It confirms the cardholder has sufficient funds, but does not complete the transaction until a capture (or completion) is submitted.
Key Characteristics of an Authorization:
- Only reserves the funds on the customer’s card — it does not transfer the money to your account yet.
- The hold usually lasts 3–7 days (depending on the card issuer).
- If not manually captured, the funds are released back to the cardholder.
- You must complete the transaction later (by submitting a capture or converting the authorization to a sale).
When to Use an Authorization:
- You're not ready to fulfill the order yet (e.g., shipping items later).
- You need to verify a card without charging it immediately (e.g., hotel check-ins, equipment rentals).
- You may need to adjust the final amount before capturing (e.g., adding tips or shipping costs).
Key Differences at a Glance:
| Feature | Sale | Authorization |
|---|---|---|
| When funds are held | Immediately | Immediately |
| When funds are captured | Immediately | Later, upon capture |
| Appears in batch? | Yes | No (until captured) |
| Risk of funds releasing | No | Yes, if not captured in time |
| Ideal use case | Immediate service or delivery | Delayed service or amount changes |
Common Questions
Q: What happens if I don’t capture an authorization?
A: The hold on the customer’s funds will expire, and the authorization will fall off. You will not get paid unless you re-authorize the card.
Q: Can I convert an authorization into a sale?
A: Yes, most systems let you capture or complete the authorization, which finalizes the payment.
Q: Will the customer see a charge for an authorization?
A: They’ll typically see a pending transaction on their statement. If the authorization isn’t captured, it will disappear once the hold period ends.
Summary
- Use Sales when you're ready to collect payment and fulfill immediately.
- Use Authorizations when you need to secure payment before providing a service or if the final amount may change.
Understanding when and how to use each can help you streamline your transactions and provide a smoother experience for your customers.