When the statement is reviewed, there is a charge for $1.00 followed by a charge for say $20.00 (if that is the purchase price). It still shows up on the cardholder’s statement, however. The problem with a ghost authorization in credit card processing is that it nearly always fails to correspond with a purchase or legitimate transaction. This is almost always done in order to test the validity of a customer’s account before opening an account where a long series of charges will be made. For example, if a customer wishes to purchase an ongoing subscription or a membership in an organization that charges monthly dues, merchants are often required to test whether the account they will be charging the fees to is legitimate.Ī ghost authorization is when a merchant asks a bank to authorize a small amount against a customer’s credit card or debit card through their merchant account prior to authorizing their actual purchase. The transaction is billed through the merchant account to the customer’s credit card, the card issuer pays the store, and the customer goes home with their purchase.īut when the transaction is more complex, things can become a little more difficult to manage for both the merchant and the issuing bank. This entire process is known as credit card processing. When a purchase is made with a credit card, it is usually a very straightforward process for the store charging the card and for the customer making the purchase.
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