Whether you’re familiar with the general payments ecosystem and understand the basic functions authorizations and credit card captures have in practice or are just starting out in the world of payments, it’s important for you to know what card captures are and how they affect the way your business, well… does business.
A credit card capture is a legally binding step that takes place after a payment authorization that officially moves a customer’s funds into the designated merchant account.
In other words, it’s the moment when a pending payment becomes a completed payment. It’s when the merchant (you) gives the okay to actually move the authorized transaction funds from the account of the issuing bank into the merchant account.
Additional processing fees are incurred at this point, and any transaction subject to a refund or chargeback will incur additional fees to move the funds back into a customer account.
No! Payment authorizations (including pre-auths) are an earlier step in the payment process, so they happen before a pending payment capture. When you first swipe your customer’s card, a message (a.k.a. authorization request) is sent to the card-issuing banks (Chase, etc.) to confirm that the funds are available for the desired transaction.
This works the same in both debit and credit card transactions, so they either check the credit limit or available funds. Once the issuing bank is pinged, it either sends back an approval or denial depending on the funds available or any fraud triggers.
Once payment is authorized, those funds are placed on a sort of hold, also known as a pending payment. That customer can’t spend that cash anywhere else for the duration of the hold.
It’s important to note that these funds are not in your possession as the merchant yet unless you have instant credit card capture enabled. You can either set up your system to automatically capture a payment upon approval or you can set your system up to manually capture them during the duration of the authorization requests.
Authorization requests usually last around a week depending on your processor, and if you don’t capture your funds within that timeframe the pending payment will be removed from your customer’s account and their available balance will go back to what it was prior to the transaction.
If you’re wondering why you wouldn’t always want credit card captures to be automatic, then you’re asking the right questions.
As a general rule of thumb, many businesses will benefit from delaying an automatic capture and instead setting their system to manual capture. Visa and Mastercard rules also recommend businesses delay their card captures.
Why? Because this pending payment period provides a valuable buffer — especially for businesses that provide services or ship physical products.
Here’s an example:
Let’s say you run a professional service business… like mowing lawns in New Jersey.
When a customer fills out an order request either online or directly through you, your first step would be to place an authorization request on the funds. Again, authorization requests verify that your customer is able to pay without actually withdrawing the funds.
So if that card bounces back, you know you don’t need to waste your time sending a guy out to the property. In other words, you reduce the risk of fraud or uncompensated work.
If the authorization request is positive, you can send someone out to mow the lawn. Once you get the confirmation from your employee that the job is done, you can change the payment status to captured.
Delayed card captures can help reduce costly chargebacks.
Since the money isn’t really moved until the pending payment capture is initiated, if something happens where you have to cancel a job or the client requests a refund, you can simply delete the transaction (or just let the authorization expire) and not get hit with chargeback fees / have to stomach additional interchange fees.
Yes. If you’re familiar with the process of settlement at the end of a shift or if your business manually captures orders after confirming a shipment, then you’re already a little familiar with capture payments.
That depends on your merchant service provider, but most systems allow you to easily switch between automatic and manual capture. You can call your provider to find out more.
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