Attempted Debit Card Fraud: Preauthorization?

Hi everyone.

I recieved a voicemail from my credit union today, asking me to call them back about my Visa Sharechek card… waited until later in the afternoon, as it’s Monday and the hold-times on Mondays are usually pretty bad.

At first, I figured it was probably just some questions about recent charges I’d made. I’m planning a getaway for Labor Day weekend and used to card for airfare and lodging, so I imagined they just wanted to verify that the charges were mine.

Not so. The nice lady I talked to informed me that on 8/7/2004, a “preauthorization” (?) for one cent was processed on my debit card from some place I did not recognize. Apparently, this raised some sort of red flag for them, and their “risk management department” determined my card number was compromised and immediately deactivated my card. Fortunately it looks like they took action before anyone could rip me off. (Kudos to Navy Federal Credit Union.)

I’ve looked for other threads to see if there are any explaining what exactly this “preauthorization” thing is. The lady tried to explain to me that it’s a way for someone to see if your account is still active/has funds available/etc. I was wondering if anyone here could shed any light on how this process works, because I’m still a bit confused by it. (I’m also curious as to how anyone got my debit card number in the first place, as I am very careful about destroying receipts and when making online transactions and the like.)

Understandably, I was intially going to throw this thread in the Pit so I could say how I really feel, but I guess I can keep it civilized for the sake of getting good info. :wink:

Did you sign up for PayPal in the last few days? When I signed up way-back-when, they told me they would ding me for a very small sum ($.33, it turns out) to verify that I was the guy I said I was. They credited that amount back to my balance right afterwards.

It’s been a few years now, but IIRC I had to tell THEM how many pennies they got from my acct to prove I was the true applicant.

On the other hand, identity theft seems to be running rampant these days. Good luck.

Have you used it to pay at the pump for a gas station? Many times, when you slide your card in, it will authorize only 1 cent. The actual charge is submitted when you’re done pumping the gas. This avoids “double exposure” on debit cards.

I’m pretty sure its what the lady says, someone was testing your card to see if it was valid. A place like UHaul might do this to verify your card works before they rent you an expensive vehicle.

I managed payments & billing for a major ecommerce company. We pre-authorized cards for $1 before delivering the services (which were delivered electronically) and then put the full charge through afterwards. We pre-authed it to avoid delivering services to someone whose card would turn out to be invalid or over limit, etc.

This is a very common practice. Hotels, for exampe, will often pre-auth your card upon check-in as insurance that the charge will go through when you check out. When a merchant pre-auths the card, the charge ties up that amount of the customer’s credit limit, even though the customer hasn’t been charged yet. The association guarantees that if they authorize the charge, the charge itself will be honored. There is a time limit, though, that may vary by issuing bank, usually about 2 days but allowed to be up to 30, after which they release the authorizaiton if the charge never came through.

A preauthorization is a type of credit-card transaction that basically “reserves” some of your available credit for possible future use. You’re returned a code which can later be used to “redeem” the transaction and actually charge the card. Preauthorization lowers your available credit but doesn’t actually charge the card until the code is “redeemed” (I don’t remember the correct term for it). If a preauth code is not either cancelled or “redeemed” it will eventually expire (although it was never clear to me exactly how long that took).

I once wrote a billing system for a web site that billed the user’s credit card each time they ran a database search. I would first pre-authorize their card for the cost of the search to make sure they had the credit to pay for it. If the search failed for some reason my program would release the preauthorization without charging the card. If the search was successful, the preauth code was “redeemed” and the transaction was charged to the card. This is a typical use of preauthorization - when you’re not sure how much something will cost in advance, or even whether you need to charge someone. Hotels and car rental companies often preauthorize a card for a standard amount but will later charge it for a different amount after you check out/return the car/etc.

A 1-cent preauthorization is very likely to be a credit-card fraudster checking to see if the card is active or not. There’s no real good reason for a 1-cent preauthorization. That’s no doubt why the credit card company flagged it.