What’s The Deal With a Credit Card Block?

It sounds like a play in football, but a credit card block is hardly athletic. It actually can be really embarrassing and dangerous to your credit. But what exactly is a credit card block?

Consumers who have rented a vehicle, stayed at a hotel, or even made a purchase of gas at the local service station using your credit card might have noticed this perfectly legal move companies use with credit cards to ensure they are going to get paid. It’s called “card blocking” and this is how it works.

When you make a reservation with a credit card at a hotel or use the card to rent a car, the company will require your credit card number to “hold” the reservation for you. The company will then pre-determine the likely total of your bill and request that your credit card company blocks that amount from your credit card to ensure you have enough credit to pay for the reservation. This will prevent you as the card holder from spending any additional funds on purchases that would put you over the limit before paying for your hotel reservation or your car rental.

However, the issue for you as a card holder is that while the company has guaranteed their payment from your credit card, the result is often that you now have no line of credit left for additional spending and may be at risk at going over your credit line. Not only is it embarrassing to be denied at the register for lack of available credit, these blocks can also subject you to high fees and penalties for going over the limit on your credit card. These fees can quickly add up, leading you to higher credit card balances and even problems with debt – just because you stayed at a hotel.

What is even more frustrating to the card holder is when the total bill comes out to a figure under what was actually blocked on the credit card. In this case, the “extra” money that has been blocked will continue to remain frozen for several days or more. This means the credit is still available, but you just can’t use it.

So, how can you avoid such a credit confusion the next time you rent a car or go away on vacation? Check out these things you should know to help you prevent a credit card block from messing up your credit limit.

• Since different credit card companies have different rules and requirements, you should consider the card issuer’s block rules before even applying for a new card. If you anticipate using your credit card for hotel or car reservations or other services that typically require the merchant to place a card block then make sure you speak with the credit card issuer and find out what the policies are. This way you know what to expect.

• If it is too late to ask the credit card company prior to application, then check with the company or hotel who may be placing a block on your credit limit. Find out how they issue the block and how long the block will last. This will let you know beforehand how much credit you have left on your card with the block.

• If you do not anticipate paying the total balance with a credit card but choose instead to use cash, check or debit card to fund the final bill in full, make sure you check with the company representative about the blocking of funds and ensure that the block will be lifted from your account and free up your credit limit as soon as possible. Without your reminder, the chances are good that the merchant or hotel clerk will neglect to remove the hold, leading to fees and penalties.

This entry was posted on Friday, January 23rd, 2009 at 3:23 pm and is filed under Card Security, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.