Pre-authorization is a process where a certain amount is temporarily blocked on a customer’s card at the time of purchase, but the funds are not immediately charged. This allows businesses to verify that the customer has sufficient funds or credit for the transaction. The amount is then either charged or released depending on the final service provided. The closure occurs when the final amount is settled, and the pre-authorized funds are either fully charged or refunded. This feature is commonly used in industries like hospitality (hotels) and car rentals, where the final bill can fluctuate based on additional charges.

Example: A hotel pre-authorizes a customer's card for a set amount when they check in, ensuring that there are sufficient funds for the stay. After the customer checks out, the hotel charges the final amount based on any additional charges such as minibar items or room service. Any unused portion of the pre-authorized funds is released back to the customer's card.