Positive Authorization

Positive authorization is the confirmation by a payment processor that a credit cardholder has sufficient funds under a credit limit to make a purchase. Positive authorization is a near instantaneous step in a transaction that results in the generation of an authorization code for the purchase. When confirmation is received by the seller, the purchasing transaction can be executed.

A swipe or insertion of a credit card into a terminal sends a request to a payment processing company, which then goes to a card association (Visa, Mastercard, American Express, Discover), which in turn transmits the request to the card issuing bank. The issuing bank checks whether the desired amount is covered by the cardholder's credit limit, or whether the card has been canceled or reported lost or stolen. If conditions are met, the issuing bank sends its approval for the transaction back through the two intermediary stops from which the request came, first to the card association, then to the payment processor. At the final step, the payment processor gives the merchant a positive authorization. All of this takes place using encrypted data for security.

A buyer will not receive positive authorization if he or she does not have enough credit available in the pre-set credit limit. If there is only $500 of credit availability remaining on the line and the request amount is $500.01, the merchant will not get the go-ahead by the payment processor to complete the purchase transaction. The other common reasons for negative authorization are canceled, lost or stolen cards. Yet another reason could be that a buyer is trying to use a credit card in a geographic location where he or she has never traveled to before. Similarly, if a buyer wants to purchase an item that is out of norm, according to his or her purchasing history, positive authorization may not be provided to the vendor. Suppose, for example, that someone has dined out at places like Olive Garden and Burger King his entire life. One day, he decides to eat at Jean Georges in Manhattan. His $1,000 bill can be accommodated by his credit line, but because this fine dining experience is completely outside the bounds of his consumer profile, the issuing bank rejects the bill settlement on the card.