You have just realised that your car is nearly out of petrol. You pull into a petrol station and intend to pay for your purchase at the pump. Before you can put any fuel into your car, the pump computer prompts you to swipe your debit card. As you do so, the window displays "authorisation in progress." Some merchants also refer to it as "debit card pre-authorisation."
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When a merchant processes a debit card purchase, he contacts the financial institution that issued the card and receives an authorisation for that amount. Some merchants, such as hotels, restaurants, petrol stations or car rentals, may estimate and receive an authorisation for a higher amount allowing room for fees, tips or additional purchases.
The financial institution places a pre-authorisation hold for that amount on the funds for as little as a few hours or as long as three to four days. The hold is removed once the transaction goes through. This may create problems for the account owner while the transaction is pending. The account owner may not be aware of the hold amount and may assume that he has a higher available balance. If he attempts to make other purchases exceeding the available balance, his debit card may be declined. In some cases the transactions will go through, overdrawing the account and incurring overdraft fees.
You may give permission to a merchant to withdraw payments automatically through your debit card. By signing an automatic payment form, you are pre-authorising the future payments. The merchant can withdraw the stated amount on a certain day of the month. If you wish to revoke the authorisation, you will need to contact the merchant and notify them in writing. If the merchant continues to withdraw the funds, you can notify the bank that the merchant no longer has the authorisation to debit the account.
Pre-authorised transactions may create problems, especially, if the authorised amount is higher than the actual purchase. In some situations, you may be able to avoid pre-authorised transactions. You can ask the merchant for the exact transaction amount and the hold time. The merchant may be able to reduce the hold time per your request. For some transactions, like petrol purchases, you can pay with your debit card by using a personal identification number (PIN) and eliminating the pre-authorisation process. If you cannot use a PIN, consider using another form of payment, like cash, cheque or credit card.
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