What is credit card “Blocking” and is it legal?

Credit card blocking is a practice used by various merchants and service providers to ensure they will receive payment for goods or services received. It is very legal and can be quite harmless provided you understand your card is being blocked and you have adequate coverage for your other needs.

How a Credit Card Block Works

A credit card block is also known as a temporary hold or as a pre-authorization or as an authorization without capture. When a merchant or service provider anticipates charges from you, they will block the estimated amount on the credit card you provide them. For example, you rent a hotel room for 3 nights at $89 per night plus tax. You reserve your room with your Visa card ending in -xxx and the hotel puts a block on your Visa for $300 for room, tax, and possible incidentals.

The block merely reserves the funds for the merchant but does not actually bill your credit card until the final billing takes place. While the amount is not actually charged to the credit card, it is reserved, therefore making that amount unusable for other services. The reason blocking is done is so that the merchant is certain to get paid for the authorized amount when the billing does actually take place. Since you are planning on the expenses, the pre-authorization is harmless provided you understand it is taking place and budget accordingly.

For example, if you know the hotel is going to block $300 then that means $300 will be unavailable on your credit card. As long as you are not precariously close to your credit limit or you have other means of payment methods available then this is not a problem. What you need to be sure of is how much the block will be and when it will be removed.

Legalities of a Credit Card Block

Credit card blocking is legal and there are no predetermined limits as each merchant or service provider has different amounts for which it wants to block. The best way to protect yourself from problems with credit card blocking is to be aware of who is blocking you, when you’ll be blocked, for how much you will be blocked, and when the block will be released.

Below is a list of common merchants and service providers that do credit card blocking. When you pre-authorize a credit card you should ask when the block will go into effect and for how much it will be. This will allow you to prepare your spending budget for that particular card. This is especially important if you are using the credit card for vacation or are close to your available credit limit.

The often overlooked problem with credit card blocks is the release of the block. Again, merchants are legally allowed to put the block on your credit card and while they are not allowed to bill your card without your approval, the block can remain in effect for an average of fifteen days. The fastest way to remove a block is to pay with the same card that was used for the block. This will allow the system to clear it out within approximately 2 days of the actual billing by seeing the “match.”

For example, if you approved $300 for ABC Hotel on credit card –xxxx, when you get billed $297 from ABC Hotel, they will reference the block number so that the credit card company will know that the block was paid and will then remove the block.

If you pay with a different credit card, the card with the block has no way of knowing that payment was received by the merchant and will hold the block until it expires or is told otherwise. Likewise, if you cancel a service that placed a block on your credit card, be sure to ask them to have the block removed promptly.

Service Providers and Merchants Who Use Credit Card Blocks

There are several common service providers and merchants who use credit card blocking as a standard part of practice. Being aware of who they are will help you plan your credit card spending whether you are traveling local or going out of town.

Hotels, car rental services, and limousine services frequently perform credit card blocking. Hotels may obtain authorization for the room rental, tax, and incidentals such as phone calls, in-room entertainment, or room service. Car rental services will include gasoline and possible insurance deductible fees in with their authorization total. Limousine services usually request pre-authorization for the cost of the fare but can add gratuity and rental damages to the total as well.

Banquet halls may block your credit card, but they usually will not do it too far in advance of your party. Since banquet halls can be quite costly and are booked well ahead of time, be sure to find out when and how much will be blocked so that you are prepared for the reduction in your available credit limit. Restaurants also may request pre-authorization if you are running a tab or hosting a large party.

Credit card blocking is standard procedure and usually does not have a negative impact on the credit card user. A good way to track credit card blocking and expenses is to use one credit card for blocks and related charges and another credit card for purchases. This way you will not have to worry about unknown or forgotten blocks on your card when you go shopping. To apply for a new credit card now, use our free online credit card finder now!

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