The incremental authorization in Cards processing

In credit cards transaction processing you can see two kinds of authorizations. One is original authorization, and the second one is incremental authorization. 

Incremental Authorization

The purpose of these transactions is principally to increase the authorized amount for a previous (original) transaction. These should be used when the merchant intends to settle multiple authorizations with a single settlement record. It is necessary to link the additional (incremental) authorization to the original (first) authorization in order to ensure proper liability coverage.

Reversals in Incremental Authorization

  • Reversal management is also unique to these transactions. Merchants should contact their acquirer for specifics on the data requirements for these transactions. Guaranteed Reservations It is common for cardholders to reserve services in these merchant categories well in advance of the date of use.
  • While there is no standard approach, there are common practices that have evolved for each specific merchant category.

Incremental

Business Scenarios for Incremental Transactions

  • Vehicle Rental – An account status inquiry is completed at the time of the request to confirm the cardholder account is in good standing. An authorization is submitted for the agreed upon amount at the initiation of the vehicle rental.
  • Cruise Lines – Typically, cruise lines charge the entire amount of the cruise at the time of the reservation. Any charges incurred during the cruise are managed as separate transactions, using the incremental authorization process if multiple purchases are to be aggregated into a single settlement record.
  • Lodging Reservations – Lodging merchants participating in the Guaranteed Reservations service have the option of utilizing the rules in regards to the “no show” policies. The Cardholder is obligated to cancel a confirmed reservation before 18:00 at the hotel, motel, or resort (Merchant’s local time). If the cardholder fails to cancel the confirmed reservation, the Merchant can charge the Cardholder a no-show charge equal to one night’s lodging. In this case, it is appropriate for the merchant to send an authorization for the amount that would be charged for one night’s lodging if they so choose.

Estimated Vs Incremental Authorization

Estimated
Authorization
Incremental
Authorization
An indicator as to whether the authorization is an estimate or is final is sent with the transaction. Authorization is valid for 31 days. (Originally 14 days, but subsequent bulletin released to change it).It must use same transaction ID as estimate, and submit with incremental authorization indicator.
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Author: Srini

Experienced software developer. Skills in Development, Coding, Testing and Debugging. Good Data analytic skills (Data Warehousing and BI). Also skills in Mainframe.