What Is a Credit Card Authorization Key?

A credit card authorization key is a code used in credit card transactions that confirms the cardholder has enough funds to make a purchase. A credit card authorization key is also known as a credit card authorization code and consists of a numeric series that confirms a payment may be processed.

Understanding Credit Card Authorization Key

When a cardholder swipes their 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 the 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 and allows the company to reference a specific entry in the case that a transaction has to be voided or reversed.

Why Credit Card Authorization Matters

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.

The credit card authorization code is typically included on the merchant sales draft in printed form, and in the case of a physical sales transaction, the code validates payment to the merchant.

In the case of a telephone or online transaction, primary verification such as full name, account number, card type, or card verification value code (CVC), is required to process the transaction, and once the information is collected and approved, an authorization code is issued.

A credit card authorization code serves as the primary proof of overall authorization and provides a clear record to track the transaction and also protect the merchant, the issuing bank, and the customer who initiated the sales transaction.