What is Credit or Debit Card Blocking?

When you use a credit or debit card to check into a hotel or rent a car, the clerk usually contacts the company that issued your card to give an estimated total. If the transaction is approved, your available credit (credit card) or the balance in your bank account (debit card) is reduced by this amount which is a called a “block” or “hold” on those amounts.

Here’s how it works: Suppose you use a credit or debit card when you check into a $100-a-night hotel for five nights. At least $500 would likely be blocked. In addition, hotels and rental car companies often add anticipated charges for “incidentals” like food, beverages, or gasoline to the blocked amount. These incidental amounts can vary widely among merchants.

Why Blocking Can Be a Problem?

Blocking is used to make sure you don’t 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, gas stations, by companies cleaning your home, and other businesses to ensure credit or account money will be available to complete payment.

How to Avoid Blocking

To avoid the aggravation that blocking can cause, follow these tips:

When you check into a hotel or rent a car – or if a restaurant or other business asks for your card in advance of service – ask if the company is “blocking,” how much will be blocked, how the amount is determined, and how long the block remains in place.

Consider paying hotel, motel, rental car, or other “blocked” bills with the same credit or debit card you used at the beginning of the transaction. Ask the clerk when the prior block will be removed.

If you pay with a different card, by cash, or by check, remind the clerk you’re using a different form of payment and ask them to remove the prior block promptly.

Ask your current debit card issuer if they permit blocks, for how long, and from what types of merchants. If they do, you may want to consider 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 or not to pay it each time.

If you’re not near your credit limit or don’t have a low balance in your bank account, blocking probably won’t be a problem. But if you’ are, be careful. It can be embarrassing to have your card declined and inconvenient. On debit cards, depending on the balance in your bank account, blocking could lead to charges for insufficient funds while the block remains in place.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Credit Report, Credit Score, Debt, Financial, Money & Identity

This post was written by John Ulzheimer