What Is a Credit Card Block?
A credit card block puts a hold for a certain amount of money on your credit card to cover the cost of services not yet rendered. Credit card blocking is most common in the hotel and car rental industries and is more likely to be used for payments involving services (as opposed to products). Blocks can also be placed on debit cards.
Credit card blocking can also refer to a temporary freeze that a card issuer puts on a credit account because it suspects fraud. This article will discuss the first type of block.
Key Takeaways
- A credit card block puts a hold for a certain amount of money on your credit card before the total amount of your bill can be known.
- Credit card blocking is most common in the hotel and car rental industries.
- Credit card blocks can have a significant impact on a cardholder with a low credit limit or who only has a small amount of credit remaining on their card.
How a Credit Card Block Works
In a credit card block, a merchant charges a certain amount of money to a customer's credit card in advance of knowing what their actual bill will be. For example, hotels use credit card blocking to ensure that a guest will have enough money available on their card to pay their entire bill when they check out. Hotels sometimes refer to this process as an authorization hold or a pre-authorization hold.
Similarly, rental car companies may place a hold on a credit card that exceeds the basic rental cost to cover incidental expenses or possible damages, particularly if the renter does not purchase the additional car insurance offered by the rental car company.
Merchants do this to protect themselves from the possibility that the final bill will exceed the amount of credit that the consumer has available on that card and that the issuer will decline to approve the transaction. When a merchant uses credit card blocking, the transaction will be posted as pending rather than completed.
How Credit Card Blocks Can Hurt Consumers
While credit card blocking can make good business sense for merchants, it can also be damaging to cardholders with a low credit limit or only a small amount of credit remaining on their card.
For example, a cardholder might make a reservation for a hotel room weeks in advance, and the hotel might block out the cost of the entire stay as soon as the reservation is confirmed. If the cardholder does not pay attention to reservation language indicating that a credit card block may be employed, they could continue using the card despite not having a sufficient amount of credit available to them. This can result in over-limit fees from the card issuer or in having their card rejected when they try to use it.
Credit card blocks are typically temporary and end when the bill is finally settled. In many cases, the cardholder can expect to see the block lifted or "reversed" within 24 hours. However, if they pay the bill with a different card from the one they used to make the reservation, it could take up to 15 days for the hold to be lifted. In those cases, the cardholder should ask the merchant to release the block once they have paid their bill in full.
What Kind of Merchants Use Credit Card Blocks?
As mentioned earlier, hotels and rental car companies may be the most common. But other "eligible merchants" on Visa's list include cruise lines, bars and restaurants, parking garages, and even fortune tellers.
What Is a Credit Card Pre-Authorization Hold?
Both authorization hold and pre-authorization hold are other names for credit card blocks that you may see online or in the fine print of your credit card agreements. The latter are sometimes referred to as pre-auths.
What Is an Incremental Authorization Hold?
When a merchant believes that it didn't block enough money on a customer's credit card in the first place, it can sometimes go back for more in the form of an incremental authorization hold.
How Can You Avoid a Credit Card Block?
You may not be able to avoid a credit card block, but there are ways to keep it from doing you any harm. If you're traveling, for example, make sure that you have enough credit available on your credit card (or cards) to cover not only your hotel bills but anything else you might want to purchase during your trip. Paying down your credit card balance before you go is one way to do that. You can also ask your card issuer to increase your credit line. It isn't obligated to do so, but it might be inclined to if you've been a reliable customer, have a solid credit score, and your income has increased since you first applied for your card.
Can a Merchant Put a Block on Your Debit Card?
Yes, as with a credit card, a merchant can put a block for a certain amount of money on your debit card. While a block on a credit card can cause you to bump up against your credit limit and have charges declined, a block on your debit card can cause any payments you're making from your linked bank account to bounce, potentially resulting in late fees and other penalties. It could even damage your credit score if you normally pay your credit card bills from that bank account. For that reason, among others, it's better to use a credit card for any expenses where a block might be involved.
The Bottom Line
Credit card blocks are common in certain industries, especially hotels and other travel providers. So it's best to ask about any possible blocks beforehand and make sure you have a large enough credit limit so that it doesn't make other purchases impossible.
FAQs
Key Takeaways
A credit card block puts a hold for a certain amount of money on your credit card before the total amount of your bill can be known.
What are credit cards and their disadvantages? ›
The pros of credit cards range from convenience and credit building to 0% financing, rewards and cheap currency conversion. The cons of credit cards include the potential to overspend easily, which leads to expensive debt if you don't pay in full, as well as credit score damage if you miss payments.
What does it mean when your credit card is blocked? ›
It could be the CVV number, the date of expiry, or the PIN being entered wrong. To protect against fraudulent usage, banks usually block a card if the wrong data has been entered more than once. The way to prevent this from happening is to be careful when entering the data.
What are the disadvantages of credit card payment system? ›
Credit cards have a few disadvantages, such as high interest charges, overspending by the cardholders, risk of frauds, etc. Additionally, there may also be a few additional expenses such as annual fees, fees of foreign transactions, expenses on cash withdrawal, etc. associated with a credit card.
Does blocking your card stop online transactions? ›
Freezing your card will affect: Most contactless and online card payments. We can't guarantee we'll be able to freeze all transactions and you'll still be liable for any that do go through.
Does blocking a card stop transactions? ›
Locking will typically prevent new transactions but leave automatic payments, such as bills, bank fees, and subscriptions, enabled.
What is the biggest disadvantage of credit? ›
Using credit also has some disadvantages. Credit almost always costs money. You have to decide if the item is worth the extra expense of interest paid, the rate of interest and possible fees. It can become a habit and encourages overspending.
What is the greatest disadvantage of using credit cards? ›
Credit Card Debt
You will need to pay back the full amount at some point—which means you'll have to cover the cost of interest charges on what you owe plus the initial purchase price. To avoid credit card debt, it's best to limit your use of credit cards and keep your balance paid off at the end of the month.
Is a credit card good or bad? ›
A credit card might be the right choice for you, but you have to consider it as a very serious financial decision. Getting a credit card at 18 can help you begin building credit, when used responsibly. However, if you don't keep up with payments, credit card debt will create a big financial mess.
Can I block my credit card temporarily? ›
Some banks allow you to temporarily block the credit cards via this method. The process is simple; you login to your Netbanking account. Then go to the credit cards section and click on block credit card. Mobile App – Almost all banks have a mobile application through which you can manage your account.
How do I know if my card is blocked? You can know the status of your card by calling the credit card customer care number of the bank and or by logging in to your net banking account as well. Why did my card get blocked? Your credit card can get blocked for a number of reasons.
Can I block a payment on my credit card? ›
Stopping a card payment
You can tell the card issuer by phone, email or letter. Your card issuer has no right to insist that you ask the company taking the payment first. They have to stop the payments if you ask them to. If you ask to stop a payment, the card issuer should investigate each case on its own merit.
What are 3 advantages and 3 disadvantages of using a credit card? ›
Advantages and Disadvantages of Credit Card
- Easy Access to Credit. The first benefit that distinguishes credit cards is the ability to obtain credit quickly. ...
- EMI Option. ...
- Record of Expenses. ...
- Exciting Offers and Cashbacks. ...
- Protection of Purchase. ...
- Improving Credit Score. ...
- Habit of Overspending. ...
- High Rate of Interest.
Using too much of your credit limit. Your credit scores can be negatively affected if you have a high credit card utilization ratio. Credit card utilization ratio refers to how much of your available credit limit you're using. Utilization ratio is an important indicator of lending risk.
What are four negatives of having a credit card? ›
Interest (and fees) can grow a balance to the point where it can get beyond the spender's control. Beyond interest, many credit card issuers charge fees for late payments, balance transfers, cash advances and foreign transactions, among other things. Some issuers even charge an annual fee just to use the card.
Does blocking credit card affect credit score? ›
Yes. Closing a credit card will negatively impact your credit score. You will see a decrease in your score as bureaus don't have access to your credit information or behavior anymore. Closing a credit card will remove the associated credit history and lowers the average length of your credit history.
What is the difference between blocking and canceling a credit card? ›
Unlike credit card closure, blocking a card has no impact on your credit score, since your credit card is temporarily blocked, without any impact on the card account. On the other hand, closing a credit card means permanently closing or canceling a credit card account with the issuer.
How long can you block your credit card? ›
Most locks are indefinite, but depending on the issuer, a lock could lift automatically after one week. Issuers usually do not limit how many times you can lock or unlock a card.
Can you block a merchant from charging your credit card? ›
Yes, you can block a company from charging your credit card. You do this by contacting your bank and either revoking authorization for the payment or requesting a stop payment order.
