The global pandemic impacted merchants in both positive and negative ways. On the one hand, online shopping saw drastic growth throughout the pandemic, a trend that continues even today. On the other hand, the world of online payment fraud evolved rapidly as well. As a result, more merchants now use advanced anti-fraud measures such as temporary holds.

Not sure how to use this feature to your advantage? Read on to learn how temporary holds work and why they’re a great addition to almost any business!

What Are Temporary Holds on Credit Cards?

A temporary hold reduces available credit on a card, much like a normal purchase. Unlike purchases, it doesn’t represent the actual transfer of funds. Think of it as a placeholder that prevents the cardholder from using those funds until the transaction is finalized.

There are two main types of temporary holds: authorization holds and administrative holds. The first type is far more relevant to merchants. It’s used to verify that a customer’s credit card has enough credit to cover a potential purchase. In the hospitality industry, many businesses use authorization holds as security deposits to cover the costs of potential damage.

Pros and Cons of Using Temporary Holds

Using temporary holds comes with both pros and cons. Here are some reasons why you may want to incorporate this feature and some things you may want to consider before doing it.

Key Benefits

The obvious benefit of temporary holds is that it helps reduce revenue loss. By preventing the cardholder from spending the promised funds, you can ensure that fewer transactions will need to be canceled. This method also allows you to hold funds in case they’re needed, in case you don’t know the final transaction amount when it’s first initiated, i.e. with hotel guests.

In some cases, holds help you save money. Transaction processing involves many different fees, some of which are charged after settling the transaction. Temporary holds allow you to identify issues before settling transactions, so you won’t have to pay those fees.

Temporary holds also help you reduce refunds and prevent chargebacks. Instead of issuing a refund, you can simply reverse the hold. Similarly, a temporary hold buys you some time to review an issue before it becomes a chargeback. Many potential chargebacks have simple solutions, and a temporary hold allows you to resolve them quickly.

Key Drawbacks

Though temporary holds are a welcome addition to almost any merchant’s arsenal, there are a few things to be aware of before implementing them. First, your data must be consistent and accurate. If you’re sending incomplete information to the issuer in your authorization reversal message, the process may last for much longer, affecting the customer experience.

There’s also a chance you could place duplicate holds for the same transaction. This may happen due to not using the incremental authorization feature correctly or not reversing holds for canceled transactions. Again, accurate processing is the key.

As digital payments continue to grow, so do the risks—and the need for smarter protection. Temporary holds offer a practical, effective way to reduce fraud, protect your revenue, and build trust with your customers. At MONA Payment Solutions, we help businesses navigate these tools with clarity and confidence. Contact us today to learn how temporary holds and other advanced features can be tailored to support your business goals and safeguard every transaction.