If you’ve ever checked your bank or credit card account and noticed a pending charge that’s higher than what you actually spent, you’ve encountered what’s known as a “hold.” These holds are a common practice, especially at gas stations, hotels, and rental car agencies, and can impact your available balance or credit. Here’s a breakdown of how card holds work, the differences between credit and debit card holds, and tips to manage them for a hassle-free experience.
What Are Card Holds and Why Do Merchants Use Them?
Card holds are temporary charges placed by merchants to ensure funds are available for purchases or services where the final total may vary. Card networks like American Express, Visa, and Mastercard require holds for certain transactions, particularly when there’s uncertainty around the final cost. Examples include:
- Hotels and Rentals: Hotels often place holds to cover potential damages or incidental charges, like room service or in-room entertainment.
- Gas Stations: Holds ensure there’s enough available balance for fuel, which doesn’t have a set price until the pump stops.
These holds protect merchants by securing funds in advance. For hotels, this approach discourages potential damages and enables coverage of additional charges a guest may incur.
Tip: Be prepared for higher hold amounts at premium hotels or luxury car rentals. Even if you’re redeeming points, a hold will likely still be required as a form of insurance.
Differences Between Holds on Credit Cards vs. Debit Cards
The type of card you use influences how holds affect your finances:
- Credit Cards: Holds affect your available credit rather than your actual balance. The pending charge is released once the merchant finalizes the total. Because credit lines are typically higher, placing holds on a credit card can prevent tying up funds in your bank account. Additionally, using a rewards credit card allows you to earn points or cashback on the completed transaction.
- Debit Cards: Holds reduce your actual bank account balance, which can be problematic if you don’t have a large checking account balance. For transactions without a PIN, the hold might last several days, during which you won’t have access to those funds. When using a PIN, funds are deducted immediately, and the hold is usually cleared sooner.
Tip: For major expenses that require holds, it’s generally better to use a credit card if available, particularly if you want to avoid affecting your day-to-day spending balance.
Ask Merchants About Holds in Advance
Being proactive can help you avoid surprises. Before booking a hotel room or using your card at a gas station, ask about any hold requirements. Important points to clarify include:
- Hold Amount: Some gas stations hold as little as $1, while others may hold $50 or more.
- Hold Duration: How long will the funds be unavailable? Different merchants release holds within different timeframes.
- Card Preferences: Some hotels and rental agencies may not accept debit cards for holds due to high amounts.
Gas stations are a prime example of varying hold policies. Since each station can set its own hold amount, it’s best to ask if you’re unsure or to check for any posted signs near the pump.
Monitor Your Available Credit and Balance
Knowing your available balance or credit limit is essential when dealing with holds. If you’re unaware of the impact a hold could have, you might find yourself unable to complete purchases or even risk overdrafts. To avoid these issues:
- Monitor Your Balance: Especially if using a debit card, check your bank account before and after a large transaction.
- Consider Credit Line Increases: For situations where you anticipate a large hold, such as a cruise or extended hotel stay, request a credit line increase. If unavailable, consider using the card with the largest available credit.
Always carry multiple card options when traveling. This can be a lifesaver if you encounter any holds that affect your primary card’s balance.
Pay with the Same Card for Holds and Final Payment
It’s common for merchants to ask for a card on file to cover incidentals. If possible, use the same card for both the hold and final payment to avoid extended pending charges. Here’s why:
When you use two different cards, one for the hold and another for the final payment, it may take additional days for the hold to be removed, as the merchant’s system may need extra processing time to reconcile the two transactions.
Tip: This is especially important for hotel stays and rental cars, where pending holds can take time to clear after you check out or return the vehicle. Sticking with one card helps ensure a faster resolution.
Additional Tips for Managing Card Holds
While holds are often unavoidable, there are ways to reduce their impact on your finances:
- Consider Using Gift Cards: For smaller holds, like those at gas stations, purchasing a Visa or Mastercard gift card in advance may be a suitable alternative. You can preload an approximate amount and use it without affecting your main debit or credit card.
- Plan for Cash Payments When Possible: Paying in cash can eliminate the need for a hold altogether, though some hotels and rental agencies may still require a deposit.
- Opt for a Credit Card with a Higher Limit: If you travel frequently or rent vehicles often, a credit card with a higher credit limit can help you handle large holds without compromising your other financial needs.
Final Thoughts: Plan Ahead to Avoid Unnecessary Card Holds
Understanding how holds work and planning your payment strategy can make a world of difference. By choosing the right card, clarifying merchant policies, and managing your available credit or balance, you can avoid unexpected restrictions on your funds. When in doubt, communicate with the merchant and consider alternative payment options like gift cards or cash.
Ready to make the most of your card? Take these steps to manage holds effectively, and enjoy smoother transactions wherever your travels take you.
