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Have you ever been told you were over your credit card limit, or had your debit card declined, even though you knew you had available credit or money in your bank account? If this happened shortly after you stayed in a hotel or rented a car, the problem could have been card “blocking.”
What Is Blocking?
When you use a credit or charge card to check into a hotel or motel or to rent a car, the clerk usually contacts your card issuer electronically with the estimated cost. If the card issuer approves the transaction, your available line of credit is reduced by this amount. This is called a “block” (or “authorization”).
Blocking is used to make sure you do not exceed your credit line (credit card) or overdraw your bank account (debit card) before checking out of a hotel or returning a rental car, leaving the merchant unpaid. Blocking is sometimes also used by restaurants for anticipated sizeable bills (like large groups at dinner or a party), by companies cleaning your home, and other businesses to ensure credit or account money will be available to complete payment.
There is nothing sinister or illegal about it, as long as the amount blocked is not out of line with what the customer is likely to pay at the end of the transaction. And most consumers are not aware that it happens at all, because the blocked amounts do not come close to their credit limits. But if you leave on vacation with your credit card near the limit, or if you are a business traveler who spends long periods on the road, you should be aware of credit blocking. This is because any additional transaction you attempt after you hit your credit limit would be rejected.
How Blocking Works.
For example, suppose you use a credit card to check into a $100-a-night hotel for five nights. At least $500 would most likely be blocked on that card. In addition, hotel and car rental companies sometimes add anticipated “incidental” costs for such things as food, beverages, or gasoline. These amounts can vary widely among merchants. If you pay your bill with the same credit card you used at the beginning of the transaction, the final actual charge probably will replace the block within a day or two.
If, however, you use a different credit card, cash, or a check to pay for these services, the company that issued the credit card you originally presented might keep the block on for as long as 15 days after you have checked out of the hotel or returned the car. This delay occurs because the first card issuer does not receive notice of the final charge and, therefore, is not aware that the transaction has been completed. Most card issuers program their computers to retain all blocks that have not been replaced by final charges for a specific number of days.
Issuers often choose a 10 or 15-day period because it is longer than most hotel stays and car rentals. Holding blocks for this long ensures that cardholders do not use their entire credit limit before checking out of the hotel or returning their rental car, leaving the hotel or rental car company unpaid. The number of days that blocks are retained varies widely among card issuers. Visa requests that financial institutions issuing its cards release all holds in under three business days of the request or when the transaction clears, whichever comes first.
Holds at self-service gas stations can be especially troublesome for debit card users, since they are not removed for up to three business days, until the gas station carries out a “batch” transaction that gives the bank the actual amount. According to the spokesman for the Consumer Action activist organization, oil companies vary in the hold amount, from $1 to $100.
How to Avoid Blocking.
- When checking into a hotel or renting a car (or if another business asks for your card in advance of service) find out if the company is “blocking,” how much will be blocked, how the amount is determined, and how long the block will remain in place. * Use the same credit card or debit card at the start of the transaction that you plan to pay with for hotel, motel, rental car, or other “blocked” bills. Find out from the clerk when the prior block will be removed.
- If you do pay with a different credit card or debit card, by cash, or by check, remind the clerk that you are using a different form of payment and ask them to remove the block promptly.
- Call your current card issuer to inquire if they allow blocks, for how long, and from what types of merchants. If they do, you may want to think about getting an overdraft line of credit from your bank. Ask about a plan that always automatically covers the overdraft and does not involve a separate bank decision on whether to pay it each time. Although you could incur some interest on this plan if you don’t pay off the amount fairly quickly, you would not have an overdraft that goes unpaid. Talk to your bank about an overdraft line of credit, how it would work, and how much it costs.
When looking for a credit or debit card, it is important to consider whether the issuer permits blocks, for how long, and from what types of merchants. You may want a card from an issuer that uses shorter blocks.