Authorization, Capture, and Settlement

Authorization checks the card. Capture claims the funds. Settlement is when the networks move money between banks. Those are three clocks, not three names for the same event. Tips, delayed shipment, and hotel stays live in the gap between authorization and capture. Funding, the deposit into your checking account, starts after settlement. It is a product your processor sold you, not a law of nature.

The three steps, in order

Authorization is the issuer's yes or no. Your terminal or gateway sends the card, the amount, and how it was captured through the processor and the payments stack to the issuing bank. The issuer checks that the card is open, that credit or funds cover the amount, and that the sale does not trip its risk rules. An approval places a hold on the cardholder's available balance. No money has moved to you. The cardholder sees a pending line. You have a promise with an expiration date.

Capture is you telling the acquirer the sale is real, and for how much. A retail tap often captures in the same breath as the authorization. A restaurant captures after the tip. An online shop often captures when the box ships. You can capture for less than the hold. You can capture for more only inside the network's permitted variance, or after an incremental authorization.

Settlement is the networks clearing those captured sales and moving money between the acquirer and the issuer. Your batch close is how the acquirer gets the clearing record. Funding is later: the acquirer depositing net proceeds to your bank. How long that deposit then takes is a funding product, covered in how long settlement takes. Do not treat "the sale settled" as "the cash is in checking."

1. 1
   Authorize. The issuer checks the card and places a hold. No money moves.
2. 2
   Capture. You claim the sale for the final amount, including a tip if one was added.
3. 3
   Batch and settle. The day's captures go to the networks. Banks settle with each other.
4. 4
   Fund. Your processor deposits the net into your bank. That is a separate product.

PIN-authenticated debit is often a single message: approval and presentment travel together, so there is no separate capture for you to remember. Signature credit and most card-not-present sales are dual-message: auth first, capture later. If your mix is mostly dual-message, the gap is where the work is.

Authorization is a hold, not a deposit

The approval code is not a wire. The issuer reduced the cardholder's open-to-buy so a second merchant cannot spend the same dollars while the sale is unfinished. That hold is why a hotel check-in or a pump pre-auth can make a debit card look empty even though nothing has posted.

Visa lets a merchant send one of a few authorization types (Visa Core Rules, 18 April 2026, section 5.7.2.2): a final amount when you already know it, an estimated amount when you do not, an incremental amount to raise a prior estimate, or, for a short list of unattended merchants, an initial authorization. An estimated authorization must be a genuine estimate. Visa's merchant guide on estimated and incremental authorizations (2024) says the estimate must not include incidental spend such as tips or a buffer for damage. Pad the check with a guessed 20 percent tip and you have over-authorized the guest who then tips in cash.

If the sale will not complete, reverse the hold. Visa Table 5-14 requires a full reversal within 24 hours of the earlier of cancellation or the end of the approval window, and a partial reversal within 24 hours of completion when the final amount is less than the sum of the authorized amounts. An incremental authorization does not restart the clock (Visa Table 5-12). The original approval date still governs.

Capture is when you claim the sale

Capture is the instruction that turns a hold into a presentment. Same-day capture is the default at a register that knows the amount at the tap. Delayed capture is a design choice:

• Restaurant: authorize the check, add the tip, capture the total, close the batch that night.
• Lodging or vehicle rental: estimated authorization at check-in or pickup, incrementals if the bill grows, capture at check-out.
• Card-not-present goods: authorize at checkout, capture on shipment. Visa gives 10 calendar days for a cardholder-initiated card-absent sale. Sitting on an auth until the warehouse catches up is how those sales miss the window.
• Fuel at an automated dispenser: Visa requires a completion or a reversal within 2 hours of the approval (Table 5-12, note 2).

Partial capture is normal when the final bill is under the hold: ship two of three items, capture those two, reverse the rest. Over-capture without an incremental authorization is only legal inside the variance table below. Capture nothing and you have no sale, only an aging hold.

Settlement is bank-to-bank. Funding is you.

Once captured sales are batched, the acquirer submits clearing records to the networks. The networks net positions between issuers and acquirers. That netting is settlement. Your deposit is funding. A processor can sell next-day or same-day funding on top of ordinary settlement. The brands do not owe you a 24-hour deposit.

Close once per business day, after the last sale, at a cutoff you actually understand. Leave Saturday's captures sitting until Wednesday and you have financed the float, aged the holds, and chewed through Visa's 5 calendar day card-present window. The per-close fee for that batch is the cheap part of that mistake.

Restaurant tip-adjust, worked

Label this illustrative. Contracts and POS settings differ. The network rule does not.

A guest's check is $80. The server authorizes $80, the known amount, with no guessed tip. The guest writes an $16 tip (20 percent). Capture is $96.

Visa Core Rules, 18 April 2026, Table 7-10 sets the permitted gap between the authorized amount and the clearing amount. Effective 21 February 2026, in the U.S., eating places, fast food, and caterers (MCC 5812, 5814, and 5811) may clear up to 30 percent above the authorization. Drinking places (MCC 5813) stay at 20 percent. Taxis, beauty, and spas are also 20 percent. Lodging and cruise are 15 percent. Vehicle rental is the greater of 15 percent or USD 75.

$80 plus 30 percent is $104. A 35 percent tip on that check is $108, four dollars past the variance. Capture $108 against an $80 auth and Visa can treat it as processed for a higher amount than authorized. That is Dispute Condition 11.3 (No Authorization / Late Presentment), the same bucket as a sale you never authorized at all.

If the POS supports incremental authorization, send one for the extra $28 before you capture $108. Visa's 2024 merchant guide: an incremental request is the additional amount, it can be sent more than once, and it does not extend the original processing window. Then close the batch. The guest's pending $80 hold becomes a $108 posting. You are not waiting for a weekly "tip settle."

A $0 auth or a $1 "test" to see if the card works is the wrong tool. Visa wants an account verification (a zero-amount check) for that job, not an estimated authorization you never mean to capture.

The clocks that bind the acquirer

Visa Core Rules, 18 April 2026, Table 5-12. The clock starts on the date of a valid authorization.

• 5 calendar days: all other card-present sales, and all merchant-initiated transactions (recurring, unscheduled credential-on-file, installments).
• 10 calendar days: cardholder-initiated card-absent sales, and estimated authorizations for most rental categories other than lodging, cruise, and vehicle rental.
• 30 calendar days: estimated authorizations for lodging, cruise, and vehicle rental, and card-absent sales sent with an extended-authorization indicator.

Those windows bind the acquirer. Your capture and batch close are how the acquirer stays inside them. Other brands split the clock differently (often by final versus preauthorization, not by card-present versus card-absent). Get the table for your mix in writing. Do not assume Visa's 5-day card-present window is universal.

Miss the window and the issuer may file a late-presentment chargeback. You can still try to represent. You are arguing from behind.

What to do this week

1. Name the three clocks on one sale: when it authorized, when it captured, when the batch closed. If those three timestamps are missing from your POS, you cannot debug a missing deposit.
2. Authorize the known amount. Do not pad restaurant, barber, or taxi auths with a guessed tip. Visa's estimated-authorization rule forbids putting the tip in the estimate.
3. Capture inside the variance, or increment first. Know your MCC. A U.S. restaurant at 30 percent is not a U.S. bar at 20 percent.
4. Reverse what you will not capture, within 24 hours. An open hold is a customer complaint with your name on it.
5. Close the batch every business day you sell, including weekend volume if you have it. Capture does not start the funding clock. The close does.

The arithmetic on a statement still comes after this. Authorization, capture, and settlement decide whether the sale exists. The fees decide what you keep.

FAQ

What is the difference between authorization, capture, and settlement? Authorization is the issuer's yes or no plus a hold on the cardholder's available balance. Capture is you claiming the sale for a final amount. Settlement is the networks moving money between the acquirer and the issuer; funding, the deposit into your bank, is a later clock.

How long does a credit card authorization last? On Visa, the acquirer has 5 calendar days from a valid authorization to process a completed card-present sale, and 10 calendar days for a cardholder-initiated card-absent sale. Lodging, cruise, and vehicle-rental sales sent with an estimated-authorization indicator get 30 calendar days. Other brands use different clocks, so ask your acquirer for the table that applies to your mix.

How should a restaurant authorize a check that will get a tip? Authorize the known check, not the check plus a guessed tip. Visa's estimated-authorization rules say the estimate must not include tips. After the guest adds a tip, capture the total if it sits inside the permitted clearing variance, or send an incremental authorization first if it does not.

Can I capture more than I authorized? Only inside the network's permitted variance, or after an incremental authorization. In the U.S., Visa Table 7-10 (effective 21 February 2026) lets eating places, fast food, and caterers (MCC 5812, 5814, and 5811) clear up to 30 percent above the authorized amount; bars (MCC 5813) stay at 20 percent. Clearing above the variance without a new approval is a no-authorization dispute.

What is the difference between settlement and funding? Settlement is bank-to-bank: the networks net captured sales between acquirer and issuer. Funding is the deposit into your checking account. Next-day funding is a processor product, not the same event as settlement and not required by the brands.

What happens if I never capture an authorization? The hold sits on the cardholder until the issuer drops it, and you never get paid. Visa requires a full reversal within 24 hours once you know the sale will not complete. An authorization that ages out is an open hold on someone else's account, not a sale.

Sources

• Visa Core Rules and Visa Product and Service Rules, 18 April 2026 edition, section 5.7.2.2 (Authorization Requirements), Table 5-12 (General Approval Response Validity Timeframes), Table 5-14 (Authorization Reversal Requirement), and Table 7-10 (Permitted Variations between the Authorization Amount and the Clearing Amount): https://usa.visa.com/dam/VCOM/download/about-visa/visa-rules-public.pdf
• Visa, "Estimated and Incremental Authorization and Reversal Processing Requirements for Visa Merchants," 2024: https://usa.visa.com/content/dam/VCOM/regional/na/us/support-legal/documents/authorization-and-reversal-processing-best-practices-for-merchants.pdf
• Visa Business News, "Authorization Framework Will Be Updated To Simplify Authorization Processing Time Frames: Information for U.S. Acquirers," 19 October 2023 (Dispute Condition 11.3 covers processing for a higher amount than authorized, and processing after the window): https://usa.visa.com/content/dam/VCOM/regional/na/us/support-legal/documents/authorization-framework-will-be-updated-to-simplify-authorization-processing-time-frames.pdf