What is the $1 authorization charge?

The Mysterious $1 Charge: Why You Might See It on Your Bank Statement

Ever checked your bank statement and noticed a seemingly random $1 charge, accompanied by a merchant you recognize? Don’t panic! It’s likely not a sign of fraud, but rather a standard security measure known as an authorization hold.

This temporary $1 charge, often described as an “authorization” or “pre-authorization,” is a way for merchants to verify the validity of your debit or credit card. Think of it as a quick test to ensure your card is active, the account has sufficient funds (or credit available), and the card details you provided are accurate.

How It Works:

When you enter your card information for a purchase, whether online or in person, the merchant’s payment processor sends a request to your bank to authorize a small amount, typically $1. This isn’t an actual charge; it’s simply a temporary hold on your funds.

The bank then verifies the information and confirms if the transaction can proceed. If all checks out, the bank places a temporary “hold” on $1 of your available funds. This hold signifies that this amount is temporarily unavailable for you to spend.

Why Do Merchants Use Authorization Holds?

Authorization holds are essential for several reasons:

• Fraud Prevention: They help prevent fraudulent transactions by ensuring the card is active and valid.
• Card Verification: They confirm that the card number, expiry date, and other details you provided are correct.
• Available Funds Check: They verify that you have enough funds or available credit to cover the potential purchase.

When Does the Hold Disappear?

The good news is that the $1 hold is temporary and will eventually disappear from your statement. Ideally, the authorization hold is automatically reversed very quickly, often within seconds. The merchant sends a “void” message to your bank, releasing the hold on the funds.

However, depending on your bank and their processing procedures, the reversal might take a bit longer. Some banks can take several days (typically 1-3 business days) to process the void and remove the hold from your account.

What If the Charge Doesn’t Disappear?

If the $1 authorization hold persists for more than a week, it’s a good idea to investigate further. Here’s what you can do:

• Contact the Merchant: Reach out to the merchant where you made the purchase and inquire about the authorization hold. They can confirm if they’ve released the hold on their end.
• Contact Your Bank: If the merchant confirms the hold has been released, contact your bank. They can provide more information about the status of the hold and potentially expedite the reversal process.

In Summary:

The $1 authorization charge is a common and generally harmless occurrence. It’s a temporary hold to verify your card information and prevent fraud. While usually reversed quickly, some banks might take a few days to process the void. If the hold remains for an extended period, contact the merchant and your bank to ensure it’s properly released. So, the next time you see that mysterious $1 charge, don’t worry – it’s just a routine security check!