What a pre-authorization is
A pre-authorization (also called an authorization or a hold) asks the customer’s bank to approve an amount and set it aside. No money moves yet. Later, the business completes the sale, called capturing or settling it, for the final amount.
Stripe’s documentation gives an example: “hotels often authorize a payment in full before a guest arrives, then capture the money when the guest checks out.”
Square describes its bar-tab version as a way to “temporarily pre-authorize a credit card for a set amount to ensure a customer’s credit card is valid and able to pay for their bill when closing out their tab.”
What Visa’s rules say
Visa’s Core Rules (edition of 18 April 2026) list several kinds of authorization, including one for the final amount and an estimated authorization, used “when the final Transaction amount is not known.”
For an estimated authorization, Visa’s rules say the merchant must make sure that:
- the amount is “a genuine estimation of what the Cardholder will spend”
- the cardholder is told the estimated amount, and that more authorization requests may follow
- the amount does not include “any amount covering potential damage, theft, other delayed charges, insurance premiums, or tips”
If the first estimate is too low, Visa’s rules allow an incremental authorization: a top-up on the same transaction.
Releasing unused holds. Visa’s rules say a merchant must submit an authorization reversal:
| Situation | What is reversed | When |
|---|---|---|
| Sale completed for less than the amount held | The difference | Within 24 hours of completing the sale |
| Sale not completed | The amount held | Within 24 hours of cancellation, or by the end of the approval’s valid period |
How long Visa approvals are valid. Visa’s table lists 5 calendar days for most in-person sales, 10 calendar days for card-absent sales the cardholder starts, and 30 calendar days for estimated authorizations at hotels, cruise lines and car rental companies.
How long holds last at Square and Stripe
| Provider | Hold length | Source wording |
|---|---|---|
| Square (bar tabs, Canada) | Around 36 hours | “typically last around 36 hours, but may vary depending on the customer’s card network and issuing bank” |
| Stripe, in person | Visa 5 days; Mastercard, American Express and Discover 2 days | Stripe adds that Visa’s “exact authorization window is 4 days and 18 hours” |
| Stripe, online | Generally 7 days (Visa 5 days for merchant-initiated sales) | “Usually, an authorization for an online card payment is valid for 7 days.” |
Stripe’s documentation says that if a hold expires before capture, “the funds are released and the payment status changes to canceled.”
Square lists some limits for bar tabs:
- Pre-authorization minimums “can range from $1.01 to $250.”
- A pre-authorization covers only its own amount. Square says the only amount assured is “the value of the pre-authorization.”
- “Interac Debit can’t be used to pre-authorize bar tabs.”
- Customers “may see 2–3 pending transactions” until the sale settles, which “can take up to 3–5 business days.”
How tips are added
There are two common ways to take a tip on a card:
- On the card reader, before payment. Stripe’s on-reader tipping shows “three suggestions” before the customer pays. Square’s Smart Tip Amounts show $1, $2 or $3 under $10, and 15%, 20% or 25% at $10 or more.
- On a signed receipt, after approval. Square’s “sign and tip” lets a server add the tip when settling the payment.
Square’s rules for tips added after approval:
- Signed open checks “will settle automatically after 36 hours,” and “all unsettled payments will be automatically settled with a $0 tip.”
- “You cannot adjust tips after payments are settled.”
- Square says its sign-and-tip receipts do not work with contactless (tap) payments.
How fees apply to tips
Square’s fees article says: “Payment processing fees are taken out of the total amount of each transaction, including tax and tip.”
Square’s refunds article says tips “are line items and can be refunded individually,” and that “the processing fees for the payment aren’t refunded back to you.”
Where to go from here
More for restaurants and bars: Card Processing for Restaurants. More on refunds and disputes: Chargebacks. On when the money arrives: When You Get Paid.
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