Home > 2014 > Personal Finance

Why Hotels Put a Hold on Your Credit Card

Advertiser Disclosure Comments 0 Comments

It’s like an episode of “Unsolved Mysteries” that plays itself endlessly for travelers.

It happened to Judith Searcy when she stayed at the Portland Marriott Downtown Waterfront in Oregon this summer. If you check your credit card statement, you may find that it has happened to you, too.

For Searcy, the mystery was a $518 pending charge to her card after she checked out of the Marriott. “I had not been told of this charge, nor did I have any documentation for it,” says Searcy, who is retired and lives in Austin. She phoned Marriott, which asked her to leave a voice mail for a manager.

Days later, the $518 charge disappeared.

Identifying this mystery is easy, but solving it isn’t. There’s an explanation for these charges, and a valid reason for having them. But they can also be frustrating to hotel guests, especially those who receive unexpected alerts from their credit card companies. And they raise the question: Is there a better way?

What’s the Explanation?

Unlike most other travelers, who might have been content with the reversal, Searcy asked for an explanation. She finally received one after reaching Tiffany Bush, the hotel’s general accountant. Turns out the charge was a routine credit card “hold.”

“This charge happened at check-in when your card was first swiped and our system automatically authorizes for possible incidental charges,” Bush wrote in an email. “Our system will continue to check that the card has enough funds as you add charges to your room.”

Marriott, like other hotels, discloses the hold at check-in. “Credit card holds are typically released within 24 hours of checking out,” says Marriott spokesman John Wolf, who notes that holds are an industry-wide practice, common among hotels and car rental companies.

Most hotels place a hold on your credit card, according to Dale Blosser, a lodging consultant. The amount varies, but as a rule, it’s the cost of the room, including tax, plus a set charge of between $50 and $200 per day. “That basically establishes a line of credit for typical items that the guest might charge to the room, such as room service, restaurant or bar charges, gift shop merchandise or valet parking fees,” Blosser says.

There’s another reason for a hold: It’s a security deposit of sorts, in case you trash the room. “It’s a way to [insure] against damage or loss,” says Kari Luckett, a financial expert who edits the credit card website CompareCards.com. The more expensive the room, the greater chance you’ll experience a generous hold, she adds. “It’s usually from five-star hotels and hotels that pack the room with food and drinks or offer room service or concierge.”

But that’s just one part of the mystery. The other is what happens behind the scenes with your credit or debit card.

How it Works

The hotel is asking your bank to post a charge against your account, in banking terms, it’s called an “authorization request.” The hotel then has about a week to make a deposit request, which is the actual transfer of money from your account. On some cards, notably debit cards, that initial authorization request looks like a charge, which is what Searcy saw.

Some hotels just pre-authorize a dollar, says Scott Tivey, a credit card payment expert with CNP Solutions. “They expect at some point in the near future that the same merchant will send in the deposit transaction to actually capture the funds,” he says.

And that’s how it happens: The hotel withdraws the charge after you check out. Except when it doesn’t.

Kelly Merritt’s experiences with credit card holds serve as a cautionary tale. Merritt, a frequent hotel guest and travel guidebook author, says these routine authorizations represent her “biggest pet peeve” about the lodging industry.

“What infuriates me most about this is the song and dance,” she says. “When I’ve protested exorbitant authorizations, some front desk staffers have responded with, ‘Oh, your card isn’t being charged, we’re only authorizing it.’ That still means those funds will be unavailable to cardholders, and for traveling families on a tight budget, or people like me who often have to stay in a different hotel every night, it can be a problem.”

How to Get Around It

You can take steps to avoid the hold. Merritt always asks about the per-night authorization amount when she checks in. And in the case of excessive holds, she has requested the hotel not to authorize her card for more than the room and tax. If it insists, she tries to negotiate a smaller amount.

One of the easiest ways to prevent a hold is to avoid using the card, says Harrine Freeman, a credit card expert and financial adviser. “Use an alternative payment method,” she says. “Carry travelers’ checks or pay with cash.” However, some hotels accept only credit cards, so ask before you try this.

If you use a credit or debit card, make sure you keep close tabs on the authorizations. Freeman and other experts strongly recommend that you sign up for automatic notifications from your bank. That way, you know exactly when a hotel authorizes your card and when the money is no longer on hold.

“Completing the transaction is the best way to remove the hold,” says credit card expert Kevin Haney of A.S.K. Benefit Solutions. “The merchant charges the account for the final amount. The bank then releases the hold.”

Perhaps the biggest mystery of all is why this needs to be explained to travelers in the first place. Hotels should disclose the amount, reasons and estimated duration of a credit card hold long before you check in, upfront and in plain English. Too often, hotels reveal these holds at the check-in desk, on signage that guests rarely bother to read.

Elliott’s latest book is “How to Be the World’s Smartest Traveler” (National Geographic). This post originally appeared on Money Talks News.

More from Money Talks News:

Image: Hemera

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team