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What Is
Credit Card And Debit Card Blocking?
By John
Mussi
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 sizable 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.
About the Author:
John Mussi is the founder of Direct Online
Loans who help UK
homeowners find the best available loans via
the http://www.directonlineloans.co.uk website.
Source: http://www.isnare.com
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