What are Authorization Fees?

Authorization fees are charges imposed on merchants for each authorization request submitted to a payment processor or card network for transaction approval. When a customer makes a purchase using a credit or debit card, the merchant sends an authorization request to verify that the funds are available in the customer’s account and that the transaction is legitimate. Each of these requests incurs a fee, which is typically calculated on a per-transaction basis. This is a standard practice in the payments industry and is a part of the overall cost structure that merchants consider when evaluating payment processing services.

The concept of an authorization fee is integral to understanding the payment processing lifecycle, as it reflects the operational costs involved in securing transaction approvals. Recognizing these costs helps merchants manage their finances and make informed decisions about their payment processing options and agreements with providers.