Beware Credit Card Blocking Schemes

Have you ever checked in to a hotel or rented a car, used a credit or debit card, and later discovered that your credit balance was higher or your debit account balance lower than you expected?

If so, it could be due to a practice called card blocking. It's perfectly legal but still annoying. It's potentially embarrassing if the block causes your card to be declined for lack of funds, potentially inconvenient if you need to make a purchase and you can't, and potentially expensive if the block causes you to exceed your credit limit or overdraw your debit account.

When you use a credit or debit card to check in to a hotel or rent a car, the person behind the desk will run your card and submit to the issuer an estimated total of your charges. If there are sufficient funds in your account, the issuer will then place a hold on that amount. Even though the money has not been taken out of your account, it's still not available for you to use.

Say you have a credit card with a limit of $5,000. You check in for a five-night stay at a hotel that costs $200 a night. The clerk will contact your card issuer, $1,000 will be blocked, and your credit limit will drop to $4,000. (Most hotels also ask to block an amount to cover potential expenses like mini-bar drinks and damage to your room -- even if you're not in a rock band.)

The hotel does this to make sure you won't check in, max out your credit limit during your stay, and then drive off into the sunset, leaving the hotel with an unpaid bill.

When you check out, if you pay with the same card you used to check in, the blocked amount will remain blocked for several days. But if you pay with a different card, the blocked amount could be kept on hold for as long as 15 days -- because the card issuer has not been automatically informed that you made final payment. (This is why it's a good idea to pay your bill with the same card you used when you checked in.)

Blocking Abounds

It's not only hotels and car rental agencies that ask card issuers to block funds in your account. Blocking is also used by restaurants (some automatically tack on a 20 percent tip), cleaning companies, and more.

Usually blocking isn't a problem. You may not even notice it's taking place. But if your credit card is often close to its limit or your debit account low on funds, blocking could not only cause you embarrassment when your card is declined, but the practice could also lead to a higher interest rate, fees, and/or penalties from your card issuer.

To better deal with card blocking, the Federal Trade Commission offers these tips:

1. When you check in to a hotel or rent a car -- or when any business asks for your card prior to delivering service -- ask if they're blocking, how much will be blocked, and how long the block will last. Then you can accommodate the amount blocked in your subsequent spending.
2. When you use a card to check in to a room or rent a car, pay your final bill with that same card. If you use a different card, ask the clerk to remove the block on your other card -- or call the issuer of that card yourself.
3. Look into overdraft protection. This might cost you a fee or interest if you don't pay the overdraft quickly, but it could save you a serious headache.