Negative Authorization

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DEFINITION of 'Negative Authorization'

A credit card approval system that compares a credit card number to a list of canceled, lost, stolen and closed-account numbers. If the number is not on one of these lists, the transaction will be approved.

INVESTOPEDIA EXPLAINS 'Negative Authorization'

Negative authorization is considered less stringent than positive authorization, which involves checking the bank's customer files for spending limits and security parameters, such as address and expiration date, before approving the transaction. Once the transaction is approved, a hold for the amount of the transaction is placed against the cardholder's credit limit.

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