Credit card preauthorization is a powerful tool in your battle against fraud at your restaurant or bar. Many business owners don’t take advantage of credit card preauthorization, however, because they aren’t sure how it would fit in with their current processes. As you learn more about pre-auth, especially supported by the right point of sale (POS) software, you’ll see it can be easily integrated into your operation and a significant factor in reducing shrinkage.
How Credit Card Preauthorization Works
When a guest in your bar or restaurant wants to open a tab, your bartender or server runs the payment card to open a ticket. State-of-the-art point of sale (POS) software will enable your staff to either swipe a mag stripe card or dip an EMV chip card to open the tab. When the tab is opened, you servers or bartenders will be able to ensure the account is valid and there are adequate funds. These industry-leading systems will securely retain information so the card won’t have to be run again when it’s time to pay.
Funds on Hold
A bar or restaurant credit card preauthorization, like pre-auths used in other markets, puts a specific amount of the card’s available balance on hold until the payment is complete or the timeframe for the hold expires. The hold temporarily decreases the customer’s credit limit on that account until the payment is made or the hold expires. Fortunately, most bar tabs are settled within a day or so, so the customer isn’t inconvenienced by the decreased credit limit, which is sometimes the case when a hotel or rental business preauthorizes a payment card for a larger amount. It is important to complete the sale initiated by the tab, though. Otherwise, the original amount would remain on hold until the credit card preauthorization expired.
Don’t Forget the Tip!
The transaction total of the tab includes a tip if the customer wants to charge it to the payment card, so ensure the limit you set for tab is high enough to cover the tip. Check with your payment processor to ensure you understand the policies for adding tips when the bill is at the hold amount for different card types and brands.
Added Benefits of Credit Card Preauthorizations
Eliminate chargebacks: The charge was authorized in advance, so as long as you complete the sale and it’s under the amount of the hold, you will be paid with no dispute.
Improve Customer Satisfaction: With a bar or restaurant credit card preauthorization, your guests can relax and enjoy the evening at their leisure—and not have to worry about presenting their payment card again when they settle the tab. It eliminates the need to physically hold a patron’s card to ensure payment—and guarantees you will be paid.
You can easily train your staff to open tabs with credit card preauthorizations, and your customers will appreciate the enhanced experiences they provide. Talk to your POS provider for more information on solutions that will help you integrate pre-auths into your restaurant or bar’s routine processes.
