Merchants should authorise and settle for exactly the same amount. If they do not know the exact amount, they should use a pre-authorisation . A pre-authorisation is basically an estimate of the amount the merchant believes will be owed at the end of a transaction.
This is very common in hotels, where on top of the room rental food and drink bills might be added. A merchants should analyse their trading history to estimate this additional cost. The pre-authorisation should then cover both the known cost (for the booking of the room) and the estimated additional cost.
However, only expected cost should be included in the estimate. To prevent reserving unnecessary reservations on a card, it is not allowed to add costs that might arise, ‘just in case’. (For example for potential damage to a room).
Topping Up
If the amount pre-authorised does not suffice for a growing bill, for example, if the guest is running up an ever-increasing bar bill, the original pre-authorisation should be topped up.
Topping up will NOT extend the term of the original authorisation for an additional 30/31 days. The total amount can be settled in one transaction using the original authorisation code and other mandatory data. In theory, you can top up a pre-authorisation as many times as you require. The increments do require customer authorisation OR a field called TRAN ID linking the top-ups to the first authorisation (you should talk to your gateway and/or booking system provider).
Settlement
A pre-authorisation should be settled within 24 hours of the end stay of the guest (I am staying with the hotel example here). The settlement must be for a lower or the exact amount of the pre-authorisation. If lower, the remaining amount of the pre-authorisation must be reversed, so the reservation will be removed from the card. You should never settle for a higher amount.
Fees
Pre-authorisations do attract additional fees, which is the reason why you should use normal authorisations if you do know the exact amount as it will reduce fees.