Pre-authorisation is a part of a payment cycle. It is the reservation of a certain amount on the customer’s credit card to ensure that the credit card is functional and has sufficient funds. The reserved amount is unavailable to the customer, but it is not charged. If the merchant does not make a transaction or cancels the pre-authorisation, the amount will be unbooked and the customer can use it for other transactions.
In car rental, pre-authorisation is used to hold a security deposit. When a customer picks up a car, the supplier reserves the predefined security deposit amount on the customer’s credit card. The card is not charged, but the customer cannot use the funds. The deposit is reserved for the whole rental period. If the car is damaged or the fuel policy is not met, the rental company can use this deposit to cover the cost. If there are no issues with the car, then the company cancels the pre-authorisation and the funds will be released.