Authorize Capture or Just Authorize?

What is the difference between authorize and authorize capture?

During the checkout process, your website sends customer information and instructions on what to do with it to your payment gateway in the form of a ‘request’. The two most common requests are Authorize and Authorize Capture.

Your gateway then acts on your request by communicating with your customer’s bank on your behalf. They try to determine if the card is valid and the requested funds are available. If all goes well, they request that the bank funds be held (so they are not available to anyone else) until the transaction can be fully processed. You’ve probably seen ‘pending’ transaction in an online account. Those are authorized/held funds. This happens regardless of which method you choose. If successful, your customer get’s a success message. If the bank rejects the request, your customer is ‘denied’.

Authorize Only Request:

Charge: Authorize.net will not request the actual release of the funds without further instruction from you to do so. You will have up to 30 days (at the time of this writing) to request the funds be released to you. This means you must at some point make that request (as a formal ‘capture’ request) or, after the waiting period, the hold will be released and the funds will not be available to you at all.

You do not have to capture the entire authorized amount (it can be less) but you may not request more than was authorized. That is why many authorizations are for a set amount over and above what the merchant thinks they will need.

For example, this happens at the gas station pump. When you run your card before pumping gas, they hold an estimated amount (typically around $50) until you finish pumping your gas. Then they capture the actual amount.

Refund: The refund process can be formal or informal. Since you haven’t actually requested the funds be released to you, you don’t have to do anything and the authorization will be cancelled after 30 days (or whatever time the gateway sets). Or you can send a formal release request and the authorization will be cancelled immediately. The refund is actually a Void request since your never actually received any money. You are just cancelling the request for money.

Authorize and Capture Request:

Charge: You are requesting that the funds be authorized and then released to you (captured) as soon as possible. That happens at your predetermined settlement time. This time is set up in your authorize.net account settings by you and is typically the end of your normal business day. You only have one settlement per day.

So throughout the day as your customers make purchases, successful transactions are authorized and put into a queue by authorize.net. At your settlement time, the capture part of the request kicks in and your gateway requests the bank held funds be released to you. This happens automatically without any action on your part. Most transactions are processed this way.

Refund: The refund process is formal. If your account has already settled for the day, the capture has already occurred and you will need to request a refund. Typically you are charged transaction fees for a Refund request. If you have not settled your account for the day, you may send a Void request. Then the authorization is cancelled and the transfer of funds (capture) never occurs. Typically you are not charged transaction fees for Void requests.

Which way is better?
You should choose the best process for your business model. Some factors to consider are:

Do you know the exact amount of the goods/services your are selling and they are immediately available to convey? Authorize and Capture.
Do you need to add to the order after the sale (for example, calculate shipping costs or custom work that can’t be determined at the time of sale)? You may wish to Authorize an estimated amount to allow you access to those additional funds without having to make the customer go through another payment transaction.
Do your customers pay in advance for something that might not happen? Authorize might work best for you. My reasoning is it typically does not cost you to cancel a transaction (void) if it was only authorized. But to refund previously captured funds does come at a cost. So if you are doing that a lot, it might be worth changing your process so that you have a window of opportunity to void a transaction instead of refunding money.

Are there other options?

Yes. If you have Customer Information Manager (CIM), you can create a customer profile with the customer’s card. Then you do not need to authorize or authorize capture funds at all. (Although I do recommend you run the profile creation request in ‘Live Mode’ which will test the validity of the card and run a test transaction.) Instead, you may request funds from a customer at a later date for any amount you choose without contacting the customer. I’ll write a post on this process soon. Until then you can read more on this option at Authorize.net.

Ready to implement CIM profiles on your website? Check out my CIM Profile and CIM Payment plugins.

What is the difference between authorize and authorize capture?

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