Authorize and Capture

Billing Payments

5 min read

Also known as: Auth and Capture, Delayed Capture, Two-Step Payment

A two-step card payment flow where funds are first reserved (authorized) and later charged (captured), giving you control over when money actually moves.

Definition

Authorize and capture is a two-stage card transaction model. The authorization step verifies the card and places a hold on the funds for a set window, while the capture step is the separate action that actually pulls the money into your merchant account.

Operators use this pattern when there's a gap between when a customer commits to a purchase and when you can or should bill them — fulfillment, shipping, fraud review, or service delivery. Your billing system holds the authorization, then triggers capture at the right business moment, either manually or via an automated rule.

It differs from 'auth and sale' (or 'sale'), which authorizes and captures in a single call. It also differs from a pre-authorization, which is typically a longer-window hold (hotels, car rentals) often released and re-captured at a different final amount.

Why It Matters

Separating authorization from capture protects margin and reduces refund work. You only move money when you've confirmed inventory, shipped the order, or completed the service — which means fewer chargebacks, fewer 'I was charged but never got it' tickets, and cleaner revenue recognition for your finance team.

Skip this pattern and you end up capturing on orders you can't fulfill, then issuing refunds that still cost interchange fees and damage your processor reputation. Teams that auto-capture everything at checkout also struggle with fraud review windows — by the time risk flags a transaction, the money is already booked and the refund clock is ticking.

Examples in Practice

A direct-to-consumer brand authorizes the card at checkout but only captures when the warehouse scans the package onto the carrier truck. If inventory turns out to be short, the auth simply expires and no refund is needed.

A B2B SaaS company selling annual contracts authorizes the card when the buyer signs the order form, then captures only after their implementation team confirms the customer's environment is provisioned and the contract start date has arrived.

A managed services agency authorizes a deposit when a new client signs a statement of work, then captures it after the kickoff call is held. If the client cancels before kickoff, the authorization is voided and the client never sees a charge on their statement.

Frequently Asked Questions

What is authorize and capture and why does it matter?

It's a two-step card payment flow: first you authorize the card to confirm funds and place a hold, then you separately capture those funds when you're ready to actually collect. It matters because it lets you align the moment of billing with the moment of value delivery, which reduces refunds, chargebacks, and revenue recognition headaches.

How is authorize and capture different from auth and sale?

Auth and sale (sometimes just called 'sale' or 'purchase') combines authorization and capture into a single transaction — the money moves immediately. Authorize and capture splits those into two API calls or events, with a gap in between. Use sale for instant-delivery goods, and auth/capture when there's any delay between commitment and fulfillment.

When should I use authorize and capture?

Use it whenever there's a meaningful gap between checkout and value delivery: physical product fulfillment, scheduled services, contract start dates, fraud or compliance review, or any case where the final amount might shift. It's also the right pattern when you want a fraud team or ops review to gate the actual money movement.

What metrics measure authorize and capture performance?

Track authorization approval rate, capture rate (captures divided by authorizations), authorization-to-capture latency, void rate (auths you cancel before capturing), and expired-authorization rate. Watch capture failure rate too — auths that succeed but fail at capture often signal stale cards, expired holds, or amount mismatches.

What's the typical cost of authorize and capture?

Most processors charge interchange and assessment fees only on the capture, not the authorization itself, though some bill a small per-authorization fee (often a few cents). Expect standard card-present or card-not-present interchange rates of roughly 2.0%–3.5% plus a fixed per-transaction fee on the captured amount. Voided authorizations typically incur no interchange.

What tools handle authorize and capture?

Payment gateways, payment service providers, and modern subscription billing platforms all support the two-step flow. Look for a billing engine that exposes capture as a deliberate event tied to fulfillment, order status, or contract milestones — not one that auto-captures everything at checkout by default.

How do I implement authorize and capture for a small team?

Pick a billing platform that supports delayed capture natively, then map your fulfillment milestones to capture triggers — order shipped, service delivered, contract activated. Set a default authorization window (most cards hold 7 days) and build a small operational checklist or automation to capture, void, or re-authorize before the hold expires.

What's the biggest mistake teams make with authorize and capture?

Letting authorizations expire silently. Card networks release holds after a set window (commonly 7 days for most card types, shorter for some), and once that happens you have no funds reserved — you have to ask the customer to pay again. Always monitor your auth aging and either capture or void before the window closes.

How long does an authorization hold last?

It depends on the card network and merchant category, but most card-not-present authorizations hold for 7 days, while some travel and hospitality codes extend to 30. After that the hold drops off the customer's available balance automatically, even if your processor still shows it as 'open' on your side.

Can I capture less than the authorized amount?

Yes, partial capture is supported by most processors and is common in retail and B2B. If you authorize $500 but only ship $420 worth of goods, you capture $420 and the remaining $80 hold drops off. Capturing more than the authorized amount, however, is usually not allowed and requires a new authorization.

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