If you’re someone who swipes your credit card for pretty much anything and everything, you know just how disruptive a hold placed on your card can be. This could happen at any time — when you fill up your tank at the gas station or when you pay for a hotel room during a weekend getaway. It can feel like the cash flow equivalent of the power getting shut off in your home.
The good news is that credit card holds are only temporary. And chances are, you’ll be able to tap into your credit card in no time. Learn what a credit card hold is, how long a credit card company can hold your payment, and more.
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What Is a Credit Card Hold?
A credit card hold is a two-part process in which the merchant and credit card issuer communicate with one another electronically. On one side, a merchant checks with your card issuer ahead of time if you’re good for a specific, preset amount. On the other side, the card issuer locks in that amount on your credit card balance. That way, the merchant ensures it is paid for the purchase.
In turn, due to how credit cards work, you won’t have access to that amount that’s set aside until either the transaction or the issue gets resolved and the hold is released.
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Types of Credit Cards Holds
Here’s a closer look at the two main types of credit card holds: authorization holds and administrative holds.
Credit Card Authorization Hold
A credit card authorization hold is usually the more complex of the two types of holds. They’re also known as “pre-authorizations,” and you can think of them as a security deposit.
A credit card authorization usually happens when you’re using a credit card to make a larger purchase or when the final amount of the transaction is unknown. Merchants in industries such as car rental companies, gas stations, and hotels commonly use these authorization holds. Other industries where a card isn’t present may also make a request.
How Does An Authorization Credit Card Hold Work?
Here’s how it works: When an authorization hold on a credit card is requested, the card issuer makes a portion of your credit card balance unavailable until the transaction is finalized.
For example: Say you book a hotel room, and the grand total is $1,000. The hotel asks the card issuer for a hold. In that case, the issuer will make that $1,000 of your credit limit unavailable. Once the transaction goes through, the authorization hold will be lifted.
Depending on the situation, there might be two authorization holds placed on your credit card. For instance, if you used your credit card to pay for a hotel stay, the first hold would be for accommodations. The second might be for the tab at the mini-bar in your room or for the restaurant bill.
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How Long Does an Authorization Credit Card Hold Last?
An authorization credit card hold can typically last anywhere from one to 30 days. Some holds might be released the same day, while others last for a few days after the transaction is settled. For instance, a hotel hold is usually released a few days after you checkout, while a hold placed by a gas station might be lifted the day you spend money at the pump.
If the transaction doesn’t settle before a hold reaches its expiration, the hold will fall off, and the amount that was held will become available again.
Credit Card Administrative Hold
The other main type of credit card holds are administrative holds. Administrative holds can be broken down into two types:
• Over-the-credit-limit administrative hold: As the name implies, if you go over your credit card limit, an administrative hold will be placed. And yes, you’ll be barred from using your card until you pay down your card so it falls below the credit limit. This is why it’s important to follow the credit card rule of spending within your limit.
• Late-payment administrative hold: If you’re behind on your credit card payment, your credit card issuer may place a late-payment administrative hold on your card. In this case, one of two things can happen. If you have a solid credit history, the card issuer might only report the late payment to the credit bureaus, and allow you to continue using your card. But if you keep making late payments or your credit is less-than-stellar, a late-payment hold might be placed until you make several months of on-time credit card payments.
When to Use an Authorization Hold
As a cardholder, an authorization hold isn’t really something you have control over. That’s because the merchant is the party that reaches out to the credit card issuer and requests a hold. This is done as a form of security to ensure the merchant gets paid for a purchase.
That being said, there are things you can do to prevent an authorization hold from happening in the first place. (More on that in a moment.)
When Not to Use an Authorization Hold
It’s up to the merchant whether or not to use an authorization hold. This might be requested if there’s a big question mark hovering over the final amount of the transaction.
Such holds are also requested when it’s worthwhile for a merchant to request a hold, given what a credit card is and how they work. This could include if the purchase is for a larger amount, or if the merchant works in an industry where there’s a high rate of non-payment for purchases.
Tips to Avoid Credit Card Holds
You can avoid credit card holds by doing the following:
• Use a card in-store. To avoid authorization holds, go inside the store and pay at the counter instead of paying online or at the pump.
• Check the policy beforehand. If you’re concerned about a hold being placed on your account, reach out to the hotel or car rental company ahead of time. See what their authorization hold policy is and what the typical amount and length of the hold is.
• Check your credit card balance. If you plan on booking a hotel room or car rental, do a quick check of your credit card balance and your card limit. If you’ve already used a lot of your current balance and might go past your limit, consider using another card, or looking for less-expensive options so you can stay within your limit.
• Pay your card balance. To keep your credit card limits low, aim to pay off your credit card balance. To stay out of late-payment territory and avoid late-payment holds, always make the credit card minimum payment.
Steps for Removing an Authorization Hold
While the merchant can release an authorization hold at any time, as the card holder you’ll need to jump through a few additional hoops to do so. Here’s what you need to do to lift an authorization hold:
• Request that the hold get lifted right away. As some holds linger a few days after the bill is paid, ask the merchant if the hold can get released as soon as the bill is paid and the transaction settled.
• Ask the credit card issuer if the hold can be removed. You can also reach out directly to the card issuer to see if a hold can be lifted. In this case, the issuer would contact the merchant and make the ask on your behalf.
The Takeaway
A credit card hold can be a nuisance, but you can also avoid one by taking a few steps. This includes checking your available balance before making a charge and always making sure to make the minimum payments. And if a hold is lingering for longer than you’d like, you can always request that the hold is removed.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
How do I remove a credit card hold?
You can remove a credit card hold by reaching out directly to the credit card company or to the merchant.
How long does a pending authorization hold take?
It depends. If it’s an authorization hold from a gas station, the hold can get lifted the same day. If it’s a hold from a hotel or car rental, where the amount you’ll be putting on the card is unknown, it can often take several days after you’ve settled the final bill for the hold to be lifted.
What can go wrong with an authorization hold?
There’s a chance that a hold can remain on your card after it’s been canceled or settled. In that case, the funds you have available through your line of credit will be limited. If this happens, you should reach out to the credit card issuer to have the hold released.
Can authorization holds prevent chargebacks?
A benefit of authorization holds is that they can prevent chargebacks for the merchant. (A chargeback is when the consumer disputes a charge and requests a refund, in which case the credit card company would withhold the funds from the merchant until the dispute is resolved.) Placing a hold would allow the merchant to avoid this scenario because they can delay processing the transaction.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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