WHAT IS AN 'Authorization Date'

Authorization date is a term that refers to the date at which a credit card transaction is approved by the credit card issuer.

BREAKING DOWN 'Authorization Date'

The authorization date is the month, day and year when a credit card issuer approves a transaction. The authorization date is not always the same as the transaction date. When the merchant processes the credit card at the moment the sale is made, the authorization date is the same as the transaction date; however, if the merchant uses batch processing the authorization date might be a day or two later.

Authorization is the first step in processing a credit card transaction. When an individual gives their credit card information to a merchant the merchant submits the transaction information to an acquirer. An acquirer is a financial institution that helps process credit card transactions. Commonly, acquirers are also financial institutions which acquire rights to a merchant account which allows them to service and manage the merchant’s bank account. The acquirer then sends the information back to the individual’s credit card issuer, which is a company like Chase or Citibank. The issuer then determines whether the individual has enough credit available to complete the transaction. During this step, the individual's credit information is also checked to make sure the card has not expired or has not been reported as lost or stolen. If everything checks out, the transaction is authorized and the purchase completed. The date when this process occurs is the authorization date. Once the transaction has been approved, the merchant has about 10 days from the authorization date to take the remaining steps required to settle the transaction and receive payment.

Other Key Dates in a Credit Card Transaction

As opposed to the authorization date, the post date is the date the credit card issuer processes the transaction and adds or subtracts the amount from the actual balance, depending on whether it is a purchase or a refund. The post date, or the settlement date, is sometimes identical to the authorization date, but it may be one to three days later. Once a transaction has been authorized, the account issuing bank will typically place the funds on hold. For a credit card transaction, this will reduce the available credit balance by the purchase amount. For a debit card transaction, the account holder will see a reduction in their available funds.Those few days in between the authorization date and the post date make up a period called the float. The credit lender reduces the borrower’s available credit as of the authorization date.
 

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