“Authorization Hold” May Hold Your Money Hostage

waiter restaurant large 150x150 Authorization Hold May Hold Your Money HostageHas this ever happened to you? You’re dining out and let’s say the bill comes to $100. You give the server your credit card to settle the tab and you leave the tip in cash on the table. But when you check your statement online, there is a charge of $120 on your account. Is someone ripping you off?

Probably not, but it could still be a problem. It’s called an “authorization hold,” which means the restaurant assumed you were going to add a nice 20% tip to the credit card and they ran it through for $120. The actual charge will replace the authorization hold in couple of days but, in the mean time, you don’t have access to that extra $20. If you are close to your credit limit, it could mean a future purchase is declined. If you used a debit card, it could mean a bounced check and overdrafts fees.

Now imagine it’s a hotel stay. You’ve checked in and given a credit card at the front desk. They put an authorization hold on your card for what they think your total bill will be (room charge, taxes, incidentals). If you are staying for several nights, this could amount to a lot of money that you no longer have access to; and when you are traveling, that can be a huge problem.

Credit card processors discourage vendors from using these kinds of holds, but they are perfectly legitimate as long as the vendor notifies customers of the practice. So what should you do? Here are some suggestions from BBB:

  • Keep tabs on your credit and bank accounts online, especially when traveling.
  • Read the fine print on hotel agreements.
  • When dining, pay for your check and tip together with either credit or cash, but not both.
  • Whenever possible, keep a “cushion” of available funds on credit cards by paying off the balance regularly.

Thanks to BBB of Southern Arizona and Dispute Resolution Specialist Micaela Clubb for the original investigation of this issue.

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About Katherine Hutt

Katherine R. Hutt, Director of Communications and Media Relations with the Council of Better Business Bureaus, is an award-winning communicator who has been helping nonprofit organizations tell their stories for the past 25 years. She was a CBBB consultant on numerous projects for more than a decade before joining the staff in 2011.