i was wondering. if you do an authorization on a customer's credit card for lets say a dedicated server of $100. or would you get a decline? what if the customer changed the card number or closed the account completely? then when the server is delivered, would you still be able to capture the funds?

With most merchant accounts the authorization is only good for a limited amount of time. I am not exactly sure what the limit is, but it is only a matter of days. So even if the cardholder did nothing, you still might not be able to capture the sale upon delivery. If the card is cancelled or changed, probably the authorization would dissolve as well.

Sometimes if you don't cap within a certain time limit you get charged extra fees. Why would you not charge it immediately for that? It is not goods you are shipping so it should be charged immediately IMO. I would just make a policy that says you get charged immediately because it is a service and note that on your sales records.

In answer to your question on this, the actual time that an authorization will remain valid and open is dependent on the timetable of the individual card issuer in question. (Typically this ranges from 7-14 days or more but it varies from one issuer to another.)

In terms of "why" someone would want to do this, the most common reason is when an item is not in stock or able to be fulfilled immediately. In such a scenario, it can be appropriate to authorize but not capture the card and wait until it is delivered to capture the funds.

It is possible to capture a sale even if the authorization has expired although this is not good practice and in certain cases can result in an issuer-generated chargeback.

A lot of times - if the situations where an item is out of stock or unavailable is quite rare - many merchants will just run sales through as a straight sale (auth and capture) transaction and then just call the customer in the event of a delay to see if they want a refund.

However, if you are dealing in a business where delays and "out of stock" issues are very frequent, the pre-auth and later capture approach can sometimes be better. Just keep in mind that in most cases, the amount of the sale will still be deducted from the cardholder's credit line for the full period anyways so it doesn't really prevent them from being 'blocked' from using that amount of credit.

Authorization reversals are technically possible for Visa but this is not a supported feature on any mainstream gateway that I'm aware of at this time.

We use the "authorize only" feature whenever a customer places an order for something higher then a certain amount.

This way, we can manually validate the order and verify it is not fraud.. before the charge actually is captured and hits the card.

Seems to work well for us. Is this not a good idea?

The reason we do this is because we had a chargeback once (long time ago) when someone placed an order for a large amount and then immediately (1 day later) did a chargeback. They never even gave us a chance to refund.

Your process sounds absolutely fine to me and seems to be working perfectly for your business so no need to change anything. :)