New Visa Authorization Rules Introduce Changes to Time Frames & Extended Authorization Options
A card transaction is a simple concept on the surface. But, it takes a lot of work behind the scenes to make a single transaction happen.
Consumers obviously like the convenience of paying with cards. However, most are unaware of the maze of processes and regulations that govern the relationship between merchants, banks, and card networks.
To their credit (no pun intended), the major card brands have recognized that the system needs updating. Over the last few years, we’ve seen policy changes that enhance security, increase fraud protection, and simplify transaction classifications.
Visa, in particular, has consistently shown that they’re not afraid to adapt existing processes and systems to better fit an evolving payments landscape. With their latest update, the company has made changes to the Visa authorization framework to both standardize time frames and modernize the overall structure.
So what are the most important changes to Visa authorization rules? What is the Visa Extended Authorization Service, and what does it mean for merchants? Let’s get into it.
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Understanding Visa Authorization
Before we go any further, it could help to give you a brief refresher on the Visa authorization process.
All payment card purchases must be authorized by the issuer. It’s possible to obtain authorization at one point and capture the funds at a future date, if the final transaction value is not known at the time authorization is requested. But, that authorization still has an expiration date. If the authorization expired, merchants needed a new authorization from the bank.
There are some exceptions here; take lodging, for example. A hotel will often request authorization for an estimated cost at guest check-in. The funds won’t be collected, however, until the cardholder checks out. At that point the hotel can submit the transaction for processing, adding any incidental expenses (parking, room service) without seeking a separate authorization.
This also comes into play with rental cars, subscription services, cruises booked months in advance, etc. What has caused confusion in the past is that the maximum clearing (or acquirer processing) time frame could vary dramatically depending on different factors, including the types of products sold.
Learn more about authorization holds
New Authorization-to-Clearing Timeframes for Visa Transactions
Over the last few years, Visa has been working to condense confusing, bloated card processing systems into a structured and simplified Visa authorization ruleset. Their most recent update has a focus on the maximum time limits for completing a transaction.
First, there are no longer separate time frames for authorization and clearing. Visa are combining authorization validity and clearing and creating a new, single Visa authorization-to-clearing time frame.
The move simplifies the process, but it doesn’t standardize everything across the board. There are still different parameters for card-present and card-not-present merchants, as well as merchants in specific verticals:
| Transaction Type | New Maximum Time Frame |
| CNP (cardholder-initiated) transactions | 10 calendar days |
| Transactions with an estimated authorization indicator for any of the following merchants: - Cruise line - Lodging - Vehicle rental | 30 calendar days |
| Transactions with an estimated authorization indicator for any of the following merchants: - Aircraft rental - Bicycle rental, including electric scooters - Boat rental - Clothing and costume rental - DVD and video rental - Equipment and tool rental - Furniture rental - Motor home rental - Motorcycle rental - Trailer parks and campgrounds | 10 calendar days |
| All other CP transactions | Five calendar days |
| All merchant-initiated transactions | Five calendar days |
In the table above, all timeframes begin on the date on which a valid authorization is received. Also, note that “merchant-initiated transactions” includes installment transactions (some exception apply in the Latin American market), as well as recurring transactions, advance payment transactions, unscheduled credential-on-file transactions, and merchandise returns and credits.
This move standardizes timeframes, bringing them in line with other Visa authorization windows. It’s also an acknowledgement on Visa’s part that merchants are starting to expand their services and payment options.
Merchants that operate automated fuel dispensers (AFDs) have five calendar days from authorization to clearing. But, for a preauthorization request at an AFD, the merchant must send a completion message or a reversal within two hours of receipt of an approval response.
Region-Specific Authorization-to-Clearing Timeframes
The new authorization-to-clearing timeframes outlined above apply in the US, as well as most other global markets. However, there are some regions and countries in which preexisting timeframes will remain the same. These may be situation-specific, or may apply to all transactions across the board.
What is the Visa Extended Authorization Service?
Of course, some merchants require longer than ten days to complete the fulfillment of a transaction. Think extended stay hotels, for example.
To address this, Visa’s newest update also introduced an optional service, called the Extended Authorization Service, or EAS. This service gives certain merchants more flexible options for authorizing transactions, allowing them to take up to 30 days to submit transactions after authorization.
Visa EAS offers this extended authorization capability to any merchant conducting a cardholder-initiated, card-not-present transaction. This extended authorization window comes at a cost, though.
Visa will charge a 0.08% EAS fee for approved authorization requests. Importantly, acquirers must specifically request the extended authorization time when applying for the extended time frame. It won’t be granted automatically.
New Partial Authorization Mandates
As of April, Visa now mandates that businesses with certain merchant category codes (MCCs) support partial authorizations for both debit and prepaid purchase transactions. This should make for a smoother, clearer process. That said, understanding and transitioning to the new Visa authorization rules will likely cause its own challenges.
“Supporting” partial auths, for instance, doesn’t automatically mean the merchant gets to use them. That may be an option for the business, but using it requires advance notice… in this case, selecting the partial auth indicator in the merchant’s auth request. If a merchant fails to do so and the transaction is declined due to insufficient funds, the merchant will be hit with additional fees.
Updates to Authorization-Related Visa Chargeback Reason Codes
Visa has a codified list of chargeback reason codes. Each dispute filed against a merchant will have one of these reason codes attached, explaining the reason the dispute was filed.
As of April 2024, Visa no longer issues chargebacks using reason code 12.1 (“Late Presentment”). Chargebacks on transactions resulting from late presentment, which were previously filed using reason code 12.1, will now be filed using reason code 11.3 (“No Authorization”). In other words, reason code 11.3 will now apply in all of the following cases:
- Authorization was required, but not obtained
- Authorization was obtained, but the transaction was processed for a higher amount
- Authorization was obtained, but the transaction was not processed in time
- Authorization was not required, and the transaction was not processed in time
How Will This Impact Issuers, Merchants, & Acquirers?
Explanations aside, the real question in which everyone is always interested is: “How will this affect me?”
If you’re a merchant who’s never experienced a need for an extended pre-authorization, it may not impact you much at all. It’s mostly about the timeframes; for merchant-initiated transactions from online businesses, the authorization window will change. But, if your business falls under one of the categories in the table above, or if you’re interested in having an extended authorization window, you should talk to your financial institution about how to pursue this option.
For banks and other financial institutions, it’s a much different story.
Although it’s not absolutely required, acquirers will now be subject to network fees if they fail to support the extended 30-day authorization option for their CNP merchants. If they choose to support the new Visa authorization rules, they’ll likely need to make system changes.
Visa has introduced a new field in VisaNet for the expected authorization clearing date, which is necessary for extended authorization holds. Merchants will need to ensure their systems can support both that field and the new EAS indicator value.
Issuers, on the other hand, are required by Visa to support both the updated Visa authorization rules and the new extended authorization indicator value. While they stopped short of making it a mandate, Visa also strongly encourages issuers to support the new expected authorization clearing date field.
Have Additional Questions?
Whether it’s changes to Visa authorization rules, legislative overhauls, or ACH technology updates, navigating payments industry compliance and rule concurrence can be a big challenge.
Unsure if you’re making the right moves? Why not ask the experts?
Contact Chargebacks911® today. We can help ensure you’re current with all dispute- and authorization-related industry rulesets.
FAQs
What are extended authorizations?
Merchants can request an extended authorization where transaction approval occurs before the merchant the final transaction amount is known. When applicable, the extended authorization period provides the option of allowing for longer fulfillment or shipping times while avoiding the need for the merchant to reverse the original authorization and request a new authorization.
What does Visa authorization mean?
Authorization means that the issuing bank has been contacted and confirms that the cardholder has enough credit or money to cover their purchase.
How long do normal Visa authorizations last?
Times will vary; under Visa’s newest mandates, more CP transactions and all merchant-initiated transactions will have 5 calendar days. Customer-initiated CNP transactions and those with estimated authorization indicator for rental agencies may have a time frame of 10 calendar days. Certain industries or circumstances may allow as many as 30 calendar days, if the extension is requested at the time of authorization.
Can you get an authorization hold removed?
Yes. To remove an authorization hold, you can either finalize the transaction, which converts the hold into a charge, or cancel the hold, instructing the bank to release the funds back to the customer's account.
