If you've ever booked a hotel room or even purchased gasoline and used a credit card to pay, then you probably already know what a credit card hold is. You might have even experienced this type of hold with your debit card, especially if you chose to use that card as a credit card. In some cases, credit card holes are no big deal. At other times, a hold of this type can mean that you don't have the money in your account that you need to make other purchases. Depending on what those purchases are, the issue can be a major inconvenience or it can escalate to something far more serious. Therefore, it's imperative that you know what a credit card hold is and how best to avoid them if at all possible.
What is a credit card hold?
Sometimes a credit card hold is placed on your card because merchants want to be certain that you have the money to cover your purchase after everything has been added in. That's why you typically see credit card holds when you purchase a hotel room or when you buy gasoline. Hotels are especially notorious for doing this because they want to be sure that they charge you not only the going rate for the room, but also for anything else that might crop up. Did you decide to charge a meal to your room at some point during your stay? Perhaps you enjoyed a drink or a snack from the mini bar located in your room. All of these things will eventually be charged to the card that you have on file and that can drive your final total up substantially. By the same token, hotel merchants will use that same card to cover the cost of any damages that have been done after you check out. As a result, they typically place a hold on your card that far exceeds the amount that you would otherwise pay per night for the room itself, all in the name of making sure that they get everything they have coming to them. Gasoline purchases can be a little bit more confusing. Typically, a hold is placed on your credit card the instant you run it. Despite the fact that you will complete that purchase within a matter of minutes, the hold may remain on your account for anywhere from three to five business days, until that purchase clears. This can go one of two ways for you, as will be outlined in the following paragraph.
The amount involved in the authorization hold depends on the particular merchant involved, as well as which cards you are using. In short, you might have an authorization hold for as little as $1 that shows up on your account or you could have one for a significantly larger amount. It happens when you use a credit card to pay for fuel, but it also happens when you use your debit card and you don't enter your PIN number. That's because these types of debit card purchases are handled as if they were credit cards, thereby making the hold stay on your account for a longer period of time. If you happened to be using a debit card from a bank that authorizes the vendor to charge significantly more than the purchase is likely worth, it's going to reduce the amount of cash that you have in your bank account until that transaction clears, at which point the remaining money will be placed back into your available funds.
This can be a real problem if you're tight on cash and you need to make other purchases that week. As a result, you might want to refrain from using cards that do this. At the other end of the spectrum, you have certain fuel vendors that will place an authorization hold for $1 on your account, even if you bought $35 worth of gasoline. Again, that amount doesn't change until the transaction clears. If you're using a debit card as a credit card and you make a $35 fuel purchase but only $1 is taken out of your bank account, you have to remember that you actually have $34 less in your bank account than it shows. Otherwise, you can trip yourself up fairly easily. This is especially true if you don't have a lot of money in that account and then you forget that you've actually got a pending purchase. In a worst-case scenario, it could mean that you end up overdrawn, stuck with accompanying fees and penalties when you're already strapped for cash.
Avoiding Credit Card Holds
Clearly, the best thing for you to do is to avoid these types of authorization holds all together. It isn't always possible to avoid them in their entirety, but you can certainly take a few simple steps to ensure that you don't get yourself in trouble by accidentally spending money that you don't really have or putting yourself in a financial bind until the transaction clears. For starters, use your debit card when you purchase fuel and don't run it as a credit card. If you're paying at the pump, enter your PIN number and run the card as a debit card. Better yet, walk up to the counter and pay for your fuel with your card, being sure to run it as a debit card. This eliminates the hold and it also keeps you safer from credit card scammers because you're bypassing the option to pay at the pump all together. It's not as convenient, but it's a lot safer and it could save you a ton of money in the end.
If you're using your card to secure a hotel room, you're probably stuck with the authorization hold and you should expect it to be far more than what you're actually spending on the room. In this type of scenario, it's really best to use a different card that you have reserved just for these types of things. If you have a credit card that you can use, that's great. If you don't have credit cards, consider purchasing a gift card from either Visa or Mastercard and then using money from your bank account to load the card with enough money that you can secure a hotel room. That prevents the hotel from having access to your actual bank account in any capacity, meaning that the funds you have there are kept safe in the event that they decide to put a significant hold on your account. As you can see, it requires a few extra steps to avoid holds or at the very least, protect the money in your bank account, but it's well worth it at the end of the day. Besides, this is just one more way that you can protect the money that you’ve worked so hard to make.
Written by Allen Lee
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