How does pre-authorization work?

Rebecca.

I'm looking to book a one night stay in a hotel, and the hotel I'm looking at says they take pre-authorization equal to your first night stay with tax to validate your credit card. I know this is fairly standard, but how does it work exactly? If they take the cost of my one night stay as authorization, do they then refund it and I have to pay it again when I arrive? Or do they just keep that money? I don't want to end up in a situation where I have double the cost of my stay taken from my account.

McAzrael

Any time you use a credit card (apart from when it is done the old fashioned way with an imprinting machine - and when was the last time you saw one of them) it is authorised first. Authorisation reserves the money, and then on completion your account is charged. If the transaction is not completed then eventually the reservation is dropped, but this can take some time. Normally, the authorisation and completion happen seconds apart, but in the cases where the final amount is uncertain, such as with a hotel bill which may later have drinks and food added to it, they can be several days apart. They carry out the authorisation on arrival because they then know that you're at least good for some of the bill (and it's quite normal for them to get authorisation for your bill plus another, say, £50). You won't be charged twice unless someone accidentally (or deliberately) completes the transaction twice, but following the authorisation the amount reserved will be taken off your available funds.

hcb42

Rebecca. wrote: »

I don't want to end up in a situation where I have double the cost of my stay taken from my account.

dont worry if the hotel industry was taking double payments off everyone who stayed it would have made the news by now

PetHur

Ha, I'm right in the middle of this at the moment and happened upon this thread via a Google search.

Its not just hotels/car hire - I made an online purchase from an etailer. Happened to be for several items and quite a high value (far more than I'd normally spend in a single transaction).

Looks like the merchant did a pre-auth for the full amount.

They "then" discovered they couldn't fulfil all of the order, so changed the order to fulfil what they could right then, and created a backorder for the other stuff. (When I say "then", this all happened within a couple of seconds.) Of course because of this the value of the main order decreased.

At the bank end (this was a debit card purchase), they saw the pre-auth and reserved the funds from my account. And then they saw the value of the main order (which they take as they dispatch the goods) and again reserved the funds out of my account.

Obviously the purchase was planned so there were funds in the account for it. However there weren't funds in this account for 2 x this purchase (which is almost what got pre-auth'd). As a result they've effectively frozen my account, to the point where I can't send a payment out to pay the phone bill!

This really gets my goat. Of course each party says it is the responsibility of the other to put right, I'm just piggy in the middle, and nobody is particularly willing to explain what has happened.

The merchant has mentioned the 7-day expiry of pre-auths, so I'm hopeful in the next few days that my problem will go away. And I've got other accounts that I can use to pay the phone bill. But anyone without the use of another account could be totally screwed.

Really leaves a sour taste.

Pete.K_3

McAzrael wrote: »

Any time you use a credit card (apart from when it is done the old fashioned way with an imprinting machine - and when was the last time you saw one of them) it is authorised first. Authorisation reserves the money, and then on completion your account is charged. If the transaction is not completed then eventually the reservation is dropped, but this can take some time. Normally, the authorisation and completion happen seconds apart, but in the cases where the final amount is uncertain, such as with a hotel bill which may later have drinks and food added to it, they can be several days apart. They carry out the authorisation on arrival because they then know that you're at least good for some of the bill (and it's quite normal for them to get authorisation for your bill plus another, say, £50). You won't be charged twice unless someone accidentally (or deliberately) completes the transaction twice, but following the authorisation the amount reserved will be taken off your available funds.

Just came across this thread and wanted to take this a step further. I understand the concept of pre authorisation but what happens when there is a dispute on the final bill. Reason is, I recently had a trip to London with another couple and the other couple wanted to pay cash (dont use Credit/Debit cards), but the hotel wouldn't accept this, so I pre authorised both rooms on my Debit card. When we came to check out, my friends were not happy about the breakfast service and wanted to negotiate a reduction in the bill. A heated discussion took place and the receptionist basically told the other couple to leave. I was happy with our room/breakfast and duly paid for my room. I was a bit unhappy and doublechecked that no funds would be taken from my account for my colleagues room, but low and behold a few days later payment was taken from my account. How do I stand about getting this back, because in theory the dispute had nothing to do with me.

Errata

Ask your friends for the money. You did them a favour, this is their opportunity to return it.

Pete.K_3

That's not the problem really. The problem is how to stop hotels etc taking full payment when there is a real grievance.

p00hsticks

Pete.K wrote: »

That's not the problem really. The problem is how to stop hotels etc taking full payment when there is a real grievance.

You could approach your card company, tell them that the amount is in dispute and ask them to initiate a chargeback.

The problem in this particular case is that I'm not sure how successful this will be because, IMHO, the hotel WAS owed some money by your friends (or you) and I'm not sure if you can do a partial chargeback. Did your friends make any subsequent effort to pay any of the bill after being asked to leave ? It sounds like they've not paid anything, and the hotel has then used your card as a last resort (precisely the reason why they ask for a pre-auth). If they were only unhappy with the breakfast service then I'd suggest that they should have made at least some payment and at most you should only be asking back the cost of the breakfasts.

Pete.K_3

My friends did indeed offer to make a payment and only wanted a refund on the breakfast. The lady receptionist (didn't speak very good english) refused to accept any bargaining and when they asked to see the manager, were told they weren't available. At this stage the receptionist said to our friends 'Go, leave the building' etc etc. They do not dispute that they do owe some money, but are not prepared to pay for the breakfast, and despite several emails/phone calls to the hotel to try and resolve the problem, the hotel are still insisting on full payment.Seems to me that giving them pre authorisation gives them carte blanche to take your money, regardless of any problems that may arise.:(