MasterCard Europe releases new rules for pre-authorized transactions

MasterCard’s new set of rules aim to increase the transparency and convenience of pre-authorizations for both consumers and merchants. They seek to ensure that:
• cardholders are always informed of the amount to be pre-authorized before they agree with using their card;
• any unnecessary block on the cardholders’ account balance or credit line is always released within 24 hours of the transaction being finalized, cancelled or completed with a different card;
• the amount blocked on the cardholders’ account or credit line does not exceed the pre-authorized amount.

A pre-authorization is an authorization for a transaction to be completed at a later time, typically used by hotels, car hire companies and companies that sell goods on-line. Pre-authorizations provide an extended payment guarantee to the companies that use them, but they can also be intransparent, confusing and inconvenient for cardholders. Today, when cardholders want to book a hotel room or buy goods on the internet, funds are often blocked on their card until the cardholder leaves the hotel or until the purchased goods are delivered.