You’re sitting across the dinner table from a business contact or hot date. You casually hand the waiter your credit card. A moment later, he returns with that poker-faced expression all cardholders dread.
Rejected? How come? You know your debt is hundreds less than your limit.
Like as not, you’ve just run afoul of the little-known but growing practice of “blocking” or “holding” part of a customer’s credit line to cover charges you haven’t yet made, but which a hotel, carrental company or gas station expects you to make.
It’s like being overcharged in advance without your knowledge, then getting the money back, well, sometime soon.
MasterCard and Visa let hotels and car-rental companies obtain holds to guarantee payment for services that, unlike other products, cannot be recovered and sold to others if the first customer doesn’t pay.
So, with vacation season approaching, here’s how this practice works:
You check in to the Gouge ‘Em Inn and take a room for three days at $100 a night, letting the clerk make an imprint of your credit card. The hotel immediately contacts the bank that issued your card to get authorization for the expected $300 bill. The bank places a hold on $300 worth of credit on your MasterCard or Visa.
The $3,500 spending limit you thought you had just shrank to $3,200.
If you’re really unlucky, the hotel will reserve an additional amount based on its estimate of phone calls, meals, and other charges they think you’ll make.
Spokesman for MasterCard and Visa say there is no limit on these estimated charges, but that they must be “reasonable.”
When you check out or return the car, an accurate charge will be sent to the card issuer and any excess that was placed on hold will be released.
If the issuer uses Visa’s state-of-the-art systems, the credit should be immediate, said Murdy. If not, she said, “it might be a couple of days.”
Ruth Susswein, executive director of the consumer group Bankcard Holders of America, said she’s heard of cases in which it took a couple of weeks. That’s more likely, she said, if the final bill and amount on hold don’t match, confusing the computer. Thus, a $270 charge and a $300 hold both stay in the system, reducing your available credit by $570 instead of $270.
In the worst cases, said Susswein, a hotel or car company blocks a customer’s credit line at the time he makes a reservation, rather than waiting until he checks in or picks up the car.
What’s a cardholder to do?
First, go on the defensive: Don’t run your cards so close to the limit. Ask merchants how much they’re putting on hold, and ask your card issuer to raise your limit or remove the hold. You can also carry a back-up card.
Susswein says holds are released more quickly if you pay your bill with the same card you used when checking in or getting the car.
Then you can go on the offensive: Challenge the hotel or car company about its blocking policies. And complain to the bank that issued the card - bank policies vary.
And vote with your feet - if you don’t like the way your bank, hotel, car company or gas station does business, take yours somewhere else.