What Is a Credit Card Block?
A credit card block puts a hold for a certain amount of money on your credit card to cover the cost of services not yet rendered. Credit card blocking is most common in the hotel and car rental industries and is more likely to be used for payments involving services (as opposed to products). Blocks can also be placed on debit cards.
Credit card blocking can also refer to a temporary freeze that a card issuer puts on a credit account because it suspects fraud. This article will discuss the first type of block.
Key Takeaways
- A credit card block puts a hold for a certain amount of money on your credit card before the total amount of your bill can be known.
- Credit card blocking is most common in the hotel and car rental industries.
- Credit card blocks can have a significant impact on a cardholder with a low credit limit or who only has a small amount of credit remaining on their card.
How a Credit Card Block Works
In a credit card block, a merchant charges a certain amount of money to a customer's credit card in advance of knowing what their actual bill will be. For example, hotels use credit card blocking to ensure that a guest will have enough money available on their card to pay their entire bill when they check out. Hotels sometimes refer to this process as an authorization hold or a pre-authorization hold.
Similarly, rental car companies may place a hold on a credit card that exceeds the basic rental cost to cover incidental expenses or possible damages, particularly if the renter does not purchase the additional car insurance offered by the rental car company.
Merchants do this to protect themselves from the possibility that the final bill will exceed the amount of credit that the consumer has available on that card and that the issuer will decline to approve the transaction. When a merchant uses credit card blocking, the transaction will be posted as pending rather than completed.
How Credit Card Blocks Can Hurt Consumers
While credit card blocking can make good business sense for merchants, it can also be damaging to cardholders with a low credit limit or only a small amount of credit remaining on their card.
For example, a cardholder might make a reservation for a hotel room weeks in advance, and the hotel might block out the cost of the entire stay as soon as the reservation is confirmed. If the cardholder does not pay attention to reservation language indicating that a credit card block may be employed, they could continue using the card despite not having a sufficient amount of credit available to them. This can result in over-limit fees from the card issuer or in having their card rejected when they try to use it.
Credit card blocks are typically temporary and end when the bill is finally settled. In many cases, the cardholder can expect to see the block lifted or "reversed" within 24 hours. However, if they pay the bill with a different card from the one they used to make the reservation, it could take up to 15 days for the hold to be lifted. In those cases, the cardholder should ask the merchant to release the block once they have paid their bill in full.
What Kind of Merchants Use Credit Card Blocks?
As mentioned earlier, hotels and rental car companies may be the most common. But other "eligible merchants" on Visa's list include cruise lines, bars and restaurants, parking garages, and even fortune tellers.
What Is a Credit Card Pre-Authorization Hold?
Both authorization hold and pre-authorization hold are other names for credit card blocks that you may see online or in the fine print of your credit card agreements. The latter are sometimes referred to as pre-auths.
What Is an Incremental Authorization Hold?
When a merchant believes that it didn't block enough money on a customer's credit card in the first place, it can sometimes go back for more in the form of an incremental authorization hold.
How Can You Avoid a Credit Card Block?
You may not be able to avoid a credit card block, but there are ways to keep it from doing you any harm. If you're traveling, for example, make sure that you have enough credit available on your credit card (or cards) to cover not only your hotel bills but anything else you might want to purchase during your trip. Paying down your credit card balance before you go is one way to do that. You can also ask your card issuer to increase your credit line. It isn't obligated to do so, but it might be inclined to if you've been a reliable customer, have a solid credit score, and your income has increased since you first applied for your card.
Can a Merchant Put a Block on Your Debit Card?
Yes, as with a credit card, a merchant can put a block for a certain amount of money on your debit card. While a block on a credit card can cause you to bump up against your credit limit and have charges declined, a block on your debit card can cause any payments you're making from your linked bank account to bounce, potentially resulting in late fees and other penalties. It could even damage your credit score if you normally pay your credit card bills from that bank account. For that reason, among others, it's better to use a credit card for any expenses where a block might be involved.
The Bottom Line
Credit card blocks are common in certain industries, especially hotels and other travel providers. So it's best to ask about any possible blocks beforehand and make sure you have a large enough credit limit so that it doesn't make other purchases impossible.
