Negative Authorization

Negative authorization is a credit card approval method. When an individual presents their card as a method of purchase, negative authorization approves credit card transaction by comparing the individual's card number to a list of canceled, lost, stolen and closed-account numbers. If the number is not on one of these lists, the transaction will be approved.

Negative authorization is considered less stringent than positive authorization. Positive authorization involves additional security and customer profile checks such as checking the bank's customer files for spending limits and security parameters, such as address and expiration date, before approving the transaction. Once the transaction is approved, a hold for the amount of the transaction is placed against the cardholder's credit limit.

Ernie is shopping. He uses his credit card to buy a new shirt. XYZ Vendor where Ernie is shopping runs his credit card to take his payment. The system through which XYZ Vendor verifies credit transactions uses negative authorization. Ernie's credit card number is checked against records of compromised card numbers, such as those that have been lost, stolen, canceled, or closed. If Ernie's number doesn't match any of the numbers on that list, his transaction will be approved.