Traveling this holiday weekend? You should be aware of credit and debit card blocking and plan the finances for your trip accordingly.
Credit or debit card blocking generally occurs at hotels, gas stations, restaurants or places where one can rent a car. When you use a credit or debit card before the total amount of the purchase or service has been determined, a merchant will sometimes request your bank block out the estimated total cost to ensure they will get paid.
For example, when you swipe your card at the gas station before beginning to pump gas, the station will often request your bank put a $50 hold/block on your account. Once you have completed your transaction the final charge replaces the hold on your account. Usually these holds are replaced within a day or two.
This also happens at hotels and rental car companies. When you use your credit card to check into a hotel or rent a car, the expected cost would likely be blocked out (at a $100-a-night hotel for five nights, at least $500 would likely be blocked). In addition, the merchant often anticipate additional charges such as food, beverages or gasoline and block those funds as well.
Once you are charged for the final amount, upon checkout for example, that amount will probably replace the block in a day or two. However, if you pay your bill with a different card, with a check or with cash, the block on your account may not be lifted for up to 15 days. This happens if the company blocking the funds (usually your bank) isn’t notified right away that you have paid another way.
Blocking only becomes a problem when people are near their credit card limit or have low balances in their accounts. If this is you, be careful. Blocking could lead to a card being denied or charges for insufficient funds while a block remains in place.
VISA recently announced that holds at the gas pump would be eliminated by its new real-time clearing program, expected to roll out soon.
Tips on how to avoid blocking problems from the Federal Trade Commission:
- 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. 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.
Have a safe Labor Day weekend!