Capstok — learn by doing

Why this matters

When a customer pays with a card, three distinct events happen: authorization (issuer holds funds), capture (merchant claims them), settlement (money actually moves to merchant's bank). Knowing this trio is the difference between integrating a card processor correctly and accidentally losing money to chargebacks, mismatches, or split captures.

Demo

The card payment lifecycle.

Try it yourself

In Stripe test mode, create a PaymentIntent with capture_method=manual, see the auth, capture later, observe the two webhook events.
Try to capture an amount LARGER than the auth — observe the processor rejects it (most allow ≤ 110%, varies by scheme rules).
Track a sandbox auth that's never captured — observe the 7-day expiry and that the cardholder's hold drops.

Prompt your AI

Use these three in order. Each builds on the one before.

1. Basics & terminology

In one paragraph, explain the three card-payment stages: auth, capture, settlement.

2. Why it works (the mechanism)

Walk me through what happens between auth and capture — what's locked, what's available, who holds the risk.

3. Advanced — application & what's next

Given a hotel booking with a $200 auth on check-in and a $342 final bill at check-out, explain the auth/capture flow including the upward-adjustment dance.

References

1. AUTH (instant; ~200ms)
   Cardholder taps/swipes/enters
   Merchant → Acquirer → Network (Visa/MC) → Issuer
   Issuer checks: balance, fraud rules, velocity limits
   Returns: approved + auth_code, OR declined + reason

   Effect: cardholder sees "pending" hold; merchant has not yet received money
   Hold typically expires in 7 days if not captured

2. CAPTURE (anywhere from instant to days later)
   Merchant tells processor "claim the auth_code"
   Common patterns:
     - Restaurants: auth on order, capture on tip-included total (30 min later)
     - Gas pumps: auth $100, capture actual fill ($43.12)
     - SaaS: auth + capture in same call (no later capture)

   Effect: pending hold converts to settled txn on the issuer's side
   Merchant's processor adds it to next batch settlement

3. SETTLEMENT (T+1 to T+5)
   Processor's accumulated captures batch into a single net deposit
   Funds land in merchant bank account
   Processor's fees (interchange + scheme + acquirer markup) already deducted

   Effect: cash hits merchant's account, less fees
   Typical fees: 2.5-3.5% in the US, 1.5-2.5% in EU, varies by card type

4. REFUND / CHARGEBACK (any time before ~120 days)
   Refund: merchant-initiated, processor pulls from merchant's bank
   Chargeback: cardholder dispute via issuer; merchant must defend or eat the loss

Failure modes:
   Auth approved, capture never sent → hold expires, funds released to cardholder
   Capture sent without auth → declined (most processors require auth_id)
   Auth amount > captured amount → "uncaptured" hold portion released after grace period

Card Rails: Authorization, Capture, Settlement