What Is a SaaS Authorization Hold?

An authorization hold, sometimes referred to as a pre-authorization or pending charge, involves a temporary reservation of funds on a payment card, where the cardholder’s money is not actually transferred. The merchant places a hold on the card for validation. Authorization holds are common when SaaS customers are on free trials, upgrading their plans, or have just started paying for a new subscription. They give the payment processor a brief window to confirm your card details before the real charge is captured.

In a standard retail or e-commerce transaction, an authorization hold is released almost immediately after the purchase is captured, often within 24–48 hours. SaaS billing works differently because the relationship is ongoing.

•   Free Trial Signups: A SaaS company may place a small hold (e.g., $0-$1) on a card for verification; charges typically occur after the trial period ends.
•   For Subscription Renewals: Sometimes they will renew, holding at the time of each cycle to keep the card active, which will be followed by billing.
•   Plan Upgrades: When a user chooses to upgrade the service plan during a billing cycle, a new authorization hold can be initiated alongside the prorated charge, reflecting as two pending transactions.

These three terms describe sequential stages in a card transaction, not the same event:

The authorization hold process influences the available balance by holding the specified amount, without an immediate debit from the account. The transfer of funds occurs upon capture and settlement. If a SaaS trial is canceled before capture, the hold expires, and the funds are released automatically.

Providing free trials is a common SaaS marketing strategy, but it also presents the consideration of requesting payment card details from users before any charges are applied. Authorization holds present several possible responses to this:

•       A $0 or $1 authorization will validate the card’s number, expiration date, and CVV.
•       With the payment method confirmed, billing can begin following the trial period.
•       Account verification requests (AVRs) are implementable by processors, and their appearance on the customer’s account statement might be contingent on the presence of a transaction amount.

The process outlined above is intended to protect SaaS companies from trial abuse involving invalid cards. Furthermore, user satisfaction could be influenced by the shift from a trial to a paid subscription.

There​‍​‌‍​‍‌​‍​‌‍​‍‌ are three steps in the complete payment process:

1.   Auth: First, the SaaS platform sends an авторизація request to the payment gateway. The gateway then passes the request on to the card network (Visa, Mastercard), which contacts the issuing bank. The bank then reserves the funds and returns the approval code.
2.   Capture: At the time of billing (or пробної версії end), the platform issues a capture request for the final amount. This action finalises the transaction.
3.   Settle: The card network collects transactions in a “batch” (normally during the night), and the funds are transferred from the cardholder’s bank to the merchant’s банк-еквайр.

Customer satisfaction levels may be associated with authorization holds, with transparency potentially playing a role. Identified areas for potential improvement frequently involve:

•       When a hold and a charge are displayed concurrently, customers might perceive it as duplicate billing; however, it doesn’t automatically represent an error. This is especially the case after a plan upgrade.
•       The presence of pending holds (including non-transactional ones) on low debit card balances can be a factor in overdraft determinations.
•       “повернення коштів” notification may be expected when a hold period concludes; the hold is usually released, and credit adjustments can happen independently, potentially without immediate notification.
•       SaaS companies may observe a relationship between the number of billing support tickets and the availability of proactive information about billing holds following trial periods.

Alternative approaches for managing this situation may exist:

•       Put a simple message at the time of signing up for a trial: “We will place a temporary $1 hold to verify your card. This will be released within 5 business days.”
•       Email customers when a hold is placed; again, notify them when it is released.
•       Billing dashboards and receipts could display ‘pending authorization’ and ‘charge’ as distinct entries.
•       Provide $0 AVRs if your payment processor can support them, to prevent a visible impact.
•       Check the language spoken on your billing page to make sure you are not confusing “authorization” with “charge.”