visa plus - What is Credit Card and Debit Card Blocking?

http://www.visaplus.co.uk/ - Visa Plus

Have you ever been told you were over your credit card limit, or had your
debit card declined, even though you knew you had available credit or money
in your bank account? If this happened shortly after you stayed in a hotel
or rented a car, the problem could have been card "blocking."

What is Blocking?

When you use a credit or debit card to check into a hotel or rent a car, the
clerk usually contacts the company that issued your card to give an
estimated total. If the transaction is approved, your available credit
(credit card) or the balance in your bank account (debit card) is reduced by
this amount. That's a "block." Some companies also call this placing a
"hold" on those amounts.

Here's how it works: Suppose you use a credit or debit card when you check
into a £100-a-night hotel for five nights. At least £500 would likely be
blocked. In addition, hotels and rental car companies often add anticipated
charges for "incidentals" like food, beverages, or gasoline to the blocked
amount. These incidental amounts can vary widely among merchants. If you pay
your bill with the same card you used when you checked in, the final charge
on your credit card, or final amount on your debit card, probably will
replace the block in a day or two. However, if you pay your bill with a
different card, or with cash or a cheque, the company that issued the card
you used at check-in might hold the block for up to 15 days after you've
checked out. That's because they weren't notified of the final payment and
didn't know you paid another way.

Why Blocking Can Be a Problem

Blocking is used to make sure you don't exceed your credit line (credit
card) or overdraw your bank account (debit card) before checking out of a
hotel or returning a rental car, leaving the merchant unpaid. Blocking is
sometimes also used by restaurants for anticipated sizeable bills (like
large groups at dinner or a party), by companies cleaning your home, and
other businesses to ensure credit or account money will be available to
complete payment.

If you're nowhere near your credit limit or don't have a low balance in your
bank account, blocking probably won't be a problem. But if you're reaching
that point, be careful. Not only can it be embarrassing to have your card
declined, it also can be inconvenient, especially if you have an emergency
purchase and insufficient credit or money in your bank account. On debit
cards, depending on the balance in your bank account, blocking could lead to
charges for insufficient funds while the block remains in place.

How to Avoid Blocking

To avoid the aggravation that blocking can cause, follow these tips:

When you check into a hotel or rent a car - or if a restaurant or other
business asks for your card in advance of service - ask if the company is
"blocking," how much will be blocked, how the amount is determined, and how
long the block remains in place.

Consider paying hotel, motel, rental car, or other "blocked" bills with the
same credit or debit card you used at the beginning of the transaction. Ask
the clerk when the prior block will be removed.

If you pay with a different card, by cash, or by cheque, remind the clerk
you're using a different form of payment and ask them to remove the prior
block promptly.

Ask your current debit card issuer if they permit blocks, for how long, and
from what types of merchants. If they do, you may want to consider getting
an overdraft line of credit from your bank. Ask about a plan that always
automatically covers the overdraft and does not involve a separate bank
decision on whether or not to pay it each time. Although you might incur
some interest on this plan if you don't pay off the amount fairly quickly,
you would not have an overdraft that is not paid. Ask your bank if they
offer an overdraft line of credit, how it would work, and how much it costs.
Received on Thu Sep 20 2007 - 06:05:53 EDT