Definition
A card purchase authorization is a security process by which the card issuer (like a bank) approves or declines a transaction. This ensures the card is valid, has enough money or credit available, and is not lost or stolen.
As credit card usage surged in the mid-20th century, a secure, efficient, and rapid authorization mechanism was necessary.
How Card Purchase Authorization Works
When you attempt to make a payment, the payment system sends a request to the card issuer, usually a bank. It checks the card’s parameters, such as validity, available balance, and fraud indicators, and then sends an authorization code either approving or declining the transaction.
Pros
- Prevents unauthorized transactions.
- Identifies and blocks suspicious transactions.
- Ensures prompt approvals or declines of transactions.
Cons
- A technical malfunction can impede the authorization process.
- Sometimes, the stringent security checks can decline legitimate transactions.
- The monitoring of transactions can raise privacy concerns.