Read this section if you want to know more about what is an Authorization Hold and how it impacts the world of crypto.
What is an Authorization Hold?
An Authorization Hold is a way of verifying an electronic payment. It does so by temporarily putting the funds on hold until the merchant clears the transaction.
Transfers between banks and merchants aren’t instantaneous and it can take several days between the actual purchase and the transaction. The authorization hold was implemented to eliminate the risk that the reserved funds could become unavailable in the meantime.
This way, merchants are ensured that the payments made in their online stores will always be fulfilled.
Authorization Hold in the world of crypto
In the world of blockchain, the authorization hold ensures the seller that the funds needed for the transaction are available and no chargebacks will be allowed.
This eliminates fraud, especially when considering that cryptocurrency transactions are in most cases irreversible.
At the same time, it’s an advantage for the buyer as their card will be charged only once they receive their crypto.
Additionally, there would be no need for a refund in case the order is canceled. The same is true for the time when the verification procedure isn’t completed. The funds just need to be released from hold.
Time limits and misuse fees
Authorization hold time limit is the maximum time length that your funds can be put on hold.
For debit cards, hold times can usually last between one and eight days. Credit cards this hold time limit can go up to 30 days.
Merchants need to be aware of this hold time limit at all times. If they do not clear or reverse the authorization within this time limit, they can be charged with a “misuse fee”. This ensures that they cannot keep funds in hold for indefinite amounts of time.
All in all, authorization hold is decent protection compared to chargeback fraud and benefits both the customer and the merchant when making purchases.