What is a pre-authorisation payment and how does it work?

Key takeaways

• A pre-authorisation payment is a temporary hold on a customer’s card that confirms funds before you charge. It helps you avoid failed payments, no shows, and unexpected losses.

• Pre-authorisation works best for bookings, rentals, variable pricing, and higher risk transactions.

• Airwallex lets you place holds, capture the final amount when you’re ready, and track everything in real time across currencies, giving you more control, fewer payment failures, and a smoother experience for customers.

You’ve probably seen a pre-authorisation payment before. Perhaps at a hotel check-in, when renting a car, or when signing up for a free trial. It appears on your banking app, but the money hasn’t been taken. It clears once everything is completed.

Your business might need to use them, too. Whether you’re dealing with no-shows, variable pricing, higher fraud risk, or just want more control over when money moves, pre-authorisation payments can help ensure you get paid.

Here’s what you need to know about what pre-authorisation payments are, how they work, when to use them, and how to set them up without adding friction for customers.

What is a pre-authorisation payment?

A pre-authorisation payment is a temporary hold on a customer’s credit or debit card. It checks the card is valid and that there are enough funds available, but no money moves yet.

You can later capture part, or all, of the held amount when the final price is confirmed. If you don’t capture within the allowed time, the hold expires and the funds are released automatically.

They’re used in hotels, car hire, rentals, travel, and SaaS, or anywhere where the final charge may change.

How pre-authorisation payments work

Now you know what a pre-authorisation payment is, here’s how they work from start to finish.

1. Customer enters card details

The customer pays online or in person. Your payment gateway sends an authorisation request to the card network and the customer’s bank, asking to reserve a set amount.

2. The bank approves and locks the funds

If the card and balance check out, the bank approves the hold. The money stays in the customer’s account but can’t be used elsewhere.

3. You capture the payment

Once you know the final total (after checkout, delivery, or service completion) you capture the amount. That turns the hold into a real payment and transfers funds to your account.

Some platforms (like Airwallex) also support partial or incremental captures, so you can adjust for changes in the final bill.

4. Hold expiry

If you don’t capture within the set time, the hold expires and the customer’s balance returns to normal.

5. Reversal or release

If you cancel the order, you can reverse the authorisation so the customer’s funds are released sooner.

How to set up pre-authorisation payments

If pre-authorisations make sense for your business, the good news is that you don’t need a complex setup. You just need a payment provider that supports them and a few clear rules for your team. Here’s how businesses implement them.

1. Turn on “auth only” payments in your payment provider

This tells your checkout to place a hold instead of taking the money straight away.

2. Choose how long you want the hold to last

Most holds last five days by default. If you’re in hospitality, rentals, or travel, you can request longer windows because you need more time before finalising the bill.

3. Decide how much to hold

Pick an amount that reflects your real exposure. For example, hotels might hold the room cost plus expected extras, rental firms might hold a damage deposit, and SaaS platforms might hold a small test amount to verify the card.

4. Capture the final amount when the service is complete

Once you know the true total, you take the payment with one click or one API request. You can capture the entire amount or a lower amount if needed.

5. Release the hold if the order changes or is cancelled

If nothing is owed, cancel the hold so the customer’s balance updates quickly. This prevents support queries.

6. Track open holds so you don’t miss expiry dates

Your team should know which holds are still active and when they expire.

Read more: B2B cross-border payments, the ultimate guide for UK businesses

Why businesses use Airwallex for pre-authorisation payments

With both customer trust and your own bottom line at stake, pre-authorisation payments only work if you can trust the entire flow from hold to capture. Some providers let you place a hold, but they don’t give you the tracking, flexibility, or currency support you need to run them confidently at scale.

Airwallex gives you a complete pre-authorisation workflow. You can place a hold, adjust the amount, capture when you are ready, or release funds early. Everything updates in real time, so your team always knows which holds are active, when they expire, and what still needs attention.

As a result, you avoid expired holds, reduce chargeback exposure, and keep customers informed with fewer disputes and surprises.

Airwallex also solves the currency problem. You can hold funds in the customer’s currency and capture in that same currency, or convert at competitive rates when it suits your business. There’s no forced FX and no extra reconciliation work.

For any variable transaction, Airwallex is a simple way to protect revenue while keeping customers happy.  

When to use pre-authorisation payments

The next step is knowing when pre-authorisation payments are the right choice for your business. In short, they work best in situations where the final amount might change or there’s a higher risk of a payment failing.  

Here’s where businesses tend to use them:

Hotels and accommodation

Hotels often issue a hold at check-in to cover the stay and any extras. They capture the final amount at checkout once everything’s confirmed.

Car hire and equipment rental

Rental companies reserve funds to protect against damage, cleaning, or late returns. They only charge what’s owed once the item’s returned.

Events and no-show protection

For appointments or bookings, businesses can pre-authorise a card shortly before the event. They capture the payment if the customer turns up or doesn’t cancel in time.

High-value or higher-risk goods

Pre-authorising before dispatch confirms the card and available funds. It reduces fraud by ensuring the money’s there before delivery.

Usage-based or variable pricing

If the final bill depends on consumption or usage, a hold is placed upfront and the exact amount’s captured later.

Free trials and subscriptions

SaaS companies often authorise a small amount at trial sign-up. It checks the card works and helps prevent failed payments when the trial ends.

Read more: The top 6 international payment gateways for UK businesses in 2025

The benefits of pre-authorisation payments

A well-timed pre-authorisation payment delivers real financial and operational advantages. These include:

Fewer chargebacks and unpaid invoices

Because the card is verified and funds are reserved upfront, you avoid many of the disputes and failed payments that happen when you charge after delivering the service.

More predictable cash flow

Once an amount is held, you know the funds will be available when you capture. This makes forecasting more accurate, especially for businesses that deal with variable pricing or delayed fulfilment.

Lower fraud exposure

If something looks suspicious after the pre-authorisation is placed, you can cancel the hold rather than issuing a refund. This saves time, reduces fees, and gives you time to investigate.

A smoother customer experience than deposits

Customers don’t see money leave their account unnecessarily. Instead, they see a temporary hold that updates when the final charge is captured. This avoids long refund delays and reduces support queries.

Operational flexibility

You can adjust the amount, capture partially, or reverse the hold if needed. This is helpful in hospitality, rentals, marketplaces, and any workflow where the final amount changes.

What’s the difference between pre-authorisation, immediate charges and deposits?

Before you set yourself up with pre-authorisation payments, you might want to compare them with two other options.

A pre-authorisation places a temporary hold on funds. It confirms the card is valid and enough money is available, but no money moves until you capture it. This is ideal when the final amount might change or when you need risk cover before delivering a service.

An immediate charge authorises and captures in a single step. The money moves straight away. This is the simplest option and works best when the price is final at the moment of purchase.

A security deposit involves taking payment upfront and refunding it later. It means strong protection for the business, but more friction for customers and extra reconciliation steps for finance teams 

Risks of pre-authorisation payments (and how to avoid them)

Pre-authorisation payments are useful, but they add a few responsibilities. Here are the main things to keep in mind.

Holds expire

A pre-authorisation doesn’t last forever. Banks and card networks set expiry limits, usually somewhere between seven and 30 days. If you don’t capture the payment before the hold expires, the funds are released and you need to start again. A basic reminder system is enough to prevent this.

Customers can be confused by reduced balances

When you place a hold, the customer will see their available balance go down even though you haven’t taken any money. This is normal, but customers aren’t always aware of how holds work. A short explanation at checkout or in a confirmation email can avoid misunderstandings.

More steps to manage

Pre-authorisation adds a few extra actions compared with a simple one step payment. You need to capture the final amount, release holds when needed, and keep an eye on expiry dates. With clear internal workflows and real time visibility, this becomes routine.

Industry rules aren’t the same for everyone

Some sectors, like hotels and car hire, are allowed longer holds and adjustments. Others, such as online retail, face tighter limits. Understanding how these rules apply to your business prevents declined captures or unexpected reversals.

Mistakes can cost you

If a hold fails, or if a dispute turns into a chargeback, the costs can add up quickly. Good tracking and clear communication reduce these risks.

Read more: Top 8 SaaS payment solutions for UK businesses in 2025

The next step with pre-authorisation payments

Pre-authorisation payments are a useful way to reduce payment failures, cut chargebacks, and protect revenue when prices vary. They confirm funds without taking money too early, which customers appreciate.

Airwallex helps you manage every step with real time tracking, flexible capture, and multi currency support, so you never lose visibility or miss a hold.

Open an account and make your payment process more secure and predictable.

FAQs

Do pre-authorisation payments affect customer trust?

Most of the time they increase trust when you explain them clearly. Customers see a temporary hold instead of money being taken straight away, which feels fair and transparent. A short note at checkout such as “This is a hold, not a charge” prevents confusion and reduces support queries.

How long does a pre-authorisation stay on a card?

Most holds last about five days. Some industries can request more time. Hotels, rentals, and travel businesses can extend holds to up to thirty or thirty one days depending on card network rules. If the hold expires before you capture the payment, the funds are released and you will need to place a new hold.

Will a pre-authorisation slow payment down?

No. The hold is instant and capturing the final amount is just as fast as a normal payment. The difference is simply when the money moves. You get more control over timing without adding friction for customers.

What if the final amount changes?

You can capture the exact amount you need, even if it is lower than the original hold. This flexibility is one of the main reasons businesses use pre-authorisation. It works well for variable pricing, add ons, usage based charges, and adjustments without issuing refunds.

Do pre-authorisations reduce chargebacks and fraud?

Yes. Because the card is validated and the funds are reserved upfront, you avoid many failed payments, no shows, and disputes that happen when you charge after providing the service. If something looks suspicious, you can simply release the hold rather than processing a refund.

How do I set up pre-authorisation payments in my business?

You only need to do three things. First, turn on auth only payments in your payment provider. Second, set clear rules for your hold amounts and how long you want funds to stay reserved. Third, capture the final amount when the service is complete. Airwallex supports all of this and lets you place holds, choose your timing, and track everything in real time across currencies.