DEFINITION of 'Credit Card Authorization Key'

A code used in credit card transaction authorizations that confirms that the cardholder has enough funds to make a purchase. The credit card authorization key, also known as a credit card authorization code, is a numeric series that confirms that a payment may be processed.

BREAKING DOWN 'Credit Card Authorization Key'

When a cardholder swipes his or her credit card at a payment terminal, a process is set in place to confirm that the cardholder is authorized to use the card and that the cardholder has sufficient funds to make a purchase. The details of the credit card are encrypted at the point-of-sale terminal, and are sent to a gateway provider for routing to the credit card issuer. When the card issuer receives the encrypted request, it verifies that the account has sufficient funds. If sufficient funds are available, the credit card company will provide a credit card authorization key to the business operating the terminal.

Credit card authorization keys are typically longer than six digits, and are generated through a combination of credit card information and transaction information. The transaction information includes the transaction amount and timestamp. The creation of the credit card authorization key allows the card company to keep a record of the transaction for its records, and allows the company to reference a specific entry in the case that a transaction has to be voided or reversed.

By using encryption technology, payment terminals and the companies that issue credit cards are able to reduce the possibility of the credit card information being stolen. The key, for example, does not match the actual credit card number, meaning that if it is printed on a receipt it cannot be used to make additional purchases. The key is an encrypted reference that only the credit card company understands, and can only be decrypted and associated with a particular account through direct access to the card system.

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