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What is Credit Card and Debit Card Blocking?
Have you ever been told you were over your credit card limit,
or had your debit card declined, even though you knew you had
available credit or money in your bank account? If this happened
shortly after you stayed in a hotel or rented a car, the problem
could have been card "blocking."
What is 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. That's
a "block." Some companies also call this placing a "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.
If you pay your bill with the same card you used when you checked
in, the final charge on your credit card, or final amount on your
debit card, probably will replace the block in a day or two.
However, if you pay your bill with a different card, or with cash
or a cheque, the company that issued the card you used at
check-in might hold the block for up to 15 days after you've
checked out. That's because they weren't notified of the final
payment and didn't know you paid another way.
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 for anticipated sizeable bills (like large groups at
dinner or a party), by companies cleaning your home, and other
businesses to ensure credit or account money will be available to
complete payment.
If you're nowhere 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're reaching that point, be careful. Not only
can it be embarrassing to have your card declined, it also can be
inconvenient, especially if you have an emergency purchase and
insufficient credit or money in your bank account. 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.
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 cheque,
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. Although you might incur some
interest on this plan if you don't pay off the amount fairly
quickly, you would not have an overdraft that is not paid. Ask
your bank if they offer an overdraft line of credit, how it would
work, and how much it costs.
You may freely reprint this article provided the author's
biography remains intact:
John Mussi is the founder of Direct Online Loans who help UK
homeowners find the best available loans via the http://www.directonlineloans.co.uk
website.
MORE RESOURCES:
Credit - Google News
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