- advertisement -

Credit card blocks lower your available credit

It's sure to put a damper on any holiday.

Two days into your long-awaited vacation and a snooty waiter is telling you that he cannot accept your credit card.

- advertisement -

You were nowhere near your limit when you left home 48 hours earlier. How can this be happening?

Blame it on a practice known as credit card blocking. Some merchants, such as hotels and rental car agencies, block out anticipated charges in advance.

Even restaurants and your local gas station can and do put blocks on your account.

"Holds occur any time the end amount of a purchase is not known at the time a card is authorized," says Kenny Thomas, director of corporate relations at Visa U.S.A.

Register at a hotel and a rental car agency with the same credit card and the full amount of each bill and then some, often 20 percent more, is automatically blocked off on your card. Even a roomy credit line can fill up fast.

"Most people don't know about it, and they only find out about it when they're really upset," says E. Thomas Garman of The InCharge Institute and author of more than 26 books on personal finance.

Say you check in for two weeks at a hotel. The hotel will automatically block off two weeks' worth of charges plus incidentals such as room service, phone calls from the room etc. on your card.

Say you get a rental car that same day. The agency will block out the full charges for a two-week rental plus a little extra for gasoline.

A considerable chunk of your credit line is eaten up before you've even unpacked a bag.

"The rental car agency is afraid you're going to wreck the car. The hotel is afraid you're going to steal stuff or rack up expensive phone calls," Garman says. "Neither one is going to change their policy because you can't pay for your dinner."

The best way to avoid such an embarrassing situation is to travel with a spare credit card.

"It's always a good idea to carry at least two credit cards. Carry one as a primary card and one as a backup," says Steve Rhode, a co-founder of Myvesta.org.

Credit card blocks usually disappear shortly after you check out of a hotel or return a rental car. If you pay with the same credit card you checked in with, the block will disappear from your credit line within a day or two and the exact transaction amount will be charged to your card.

"The hold is released as soon as the final transaction is cleared and that's usually within 24 hours," Thomas says. "Visa policy requires merchant holds last no more than 72 hours after the final transaction takes place."

When blocks linger
But if you end up paying with a different credit card or by cash or check, there's a chance a block could linger on your credit line for as long as two weeks. The reason? The merchant forgot to release the initial hold on your credit card after you paid your bill by another means.

"If you pay with check or cash, remind them to remove the block when you leave," says Carole Reynolds, a senior attorney with the Federal Trade Commission. "You don't want to be charged twice."

Be sure to check with your credit card company to make sure the block is really gone.

"Ask about 'transactions pending but not yet posted,'" Rhode says. "The credit line minus the credit card balance should equal available credit. When it doesn't, the difference is blocks on your card."

Large credit card blocks tend to pop up when you're doing a lot of traveling. But it's important to realize that smaller credit blocks happen all the time. Restaurants do it.

When you hand the waiter your credit card, he will automatically block off the price of the meal plus a 20 percent tip. The block is then reconciled with the amount you decide to pay when you sign the receipt.

Credit card blocks even happen at gas stations. Think about how you pay at the pump. First you swipe the card and then you fill up. After you swipe your card, the gas station blocks out say, $50, from your credit line and then you're allowed to start fueling.

Say you charge $15 worth of gas. The difference between the hold and the actual purchase amount is $35. That $35 will be released from your credit line in a day or so.

Because blocks are usually gone by the time a person gets a credit card bill, few people know anything about them -- even the fraud investigators at some banks.

A Maryland couple learned this lesson the hard way after a gas station blocked $75 from a joint credit card account.

The husband was using the card while on business in Greece. Back home, the wife used the credit card to fill up at an Amoco station. The price of the transaction was $22.53. Amoco blocked out $75.

When she got home, she received a call from her bank's fraud department wanting to know if she just spent $75 at an Amoco station. The wife said "no." So the fraud department disconnected the card. The husband got stuck in Greece without a credit card.

"They were fooled by it," says Eric Friedman, Chief of the Divison of Consumer Affairs with Montgomery County Consumer Affairs in Maryland. "They stranded this poor guy in Greece."

Debit-card blocks
Merchants are also able to place holds or blocks on consumer debit cards. While no money actually leaves your checking account, a block does affect your available balance.

Say you have $100 in your checking account and you use your debit card at a gas station. The station blocks out $75 and you purchase $10 worth of gas. Until that block is cleared, your available balance will be just $25, instead of $90. You could find yourself overdrawn and eating some substantial fees in no time. If this happens to you, be sure to call your bank and explain the situation.

"If a hold causes them a problem, they should discuss that with the issuing bank and ask them for relief on the fees," Thomas says.

People who are close to their credit limits or maintain low balances in their checking accounts should be mindful of blocking when they make purchases.

Always bring an extra credit card when you travel.

Be sure to ask hotels and rental car agencies about their blocking policies. When you register find out how much money will be blocked on your card. Remind them to remove the block when you leave the hotel or return the car.

Double-check with your bank to see that the block has been removed.

 
-- Updated: Jan. 12, 2005
   

 

 
 

 

Looking for more stories like this? We'll send them directly to you!
Bankrate.com's corrections policy
Print  
 

Credit Cards
Compare weekly rates
WEEKLY AVERAGES
Type Fixed Variable
Standard 13.23% 14.82%
Gold
Platinum 12.70% 15.89%
All 13.02% 15.61%



RELATED CALCULATORS
  Loan calculator (includes amortization schedule)  
  See your FICO score range -- free  
  What will it take to pay off your credit card?  
VIEW ALL 

BASICS SERIES
Credit Card Basics
Don't get trapped by card debt. Learn to use it wisely.
How to find the best card
Check your credit report
Finance charges explained
How to ask for a lower rate
Improve credit with a card
How to repair your credit

MORE ON BANKRATE
Banking glossary  
News archive  
Keep an eye on the leading rates  
Find a high-yielding CD


- advertisement -

 
- advertisement -