This is the term given to the process of validating funds available on a credit or debit card. It is done at the time the transaction is entered or swiped through a Point-of-Sale terminal. When you process a credit card transaction, a response comes back from the issuing bank, all in a second or two. An authorization is either approved or declined by the issuing bank.
If the authorization is approved, that means funds are available to be withdrawn from the customer’s account and added to your bank account. When an authorization is approved, a six or seven digit authorization code is provided, along with the Address Verification Service (AVS) response. If no authorization is given, this is a decline, meaning there are either not enough funds in the customer’s bank account (if a debit card) or the customer has most likely reached their limit on their credit card.