Most Frequent travelers know all about credit card blocking, many from painful first hand experience. Hotels post notices of their policy regarding credit blocking, usually in the form of an obscure plaque some clerks will point to when an inquisitive visitor checks in. Car rental companies rapidly recite their policy to callers wanting to reserve an SUV for the family vacation. Still hundreds of unsuspecting customers will experience the pain of credit card blocks every day. So what exactly are these blocks?
Due to the risk involved, credit card issuers block your credit. The amount of credit reduces when a block is applied to your account. Including the amount of the block may be more than you think as the bank may add in additional estimated charges such as gasoline for a car rental or food for a hotel stay. Even a small pay at petrol pump can cause you a block. These blocks or “holds” can cause for some rather difficult times if you unknowingly end up in the worst situation.
Suppose you are flying to Las Vegas for the weekend. Assuming you have not yet acquired high-roller status, you will need to reserve a flight, hotel room and car rental.
Each of these reservations will cause a block to be placed on your ever-faithful rewards credit card. Then in an effort to smooth-over the news of your impending excursion, you take your significant other to the finest restaurant in town. Just think of that situation when waiter lets you know that your credit card is blocked.
Another, and even more heinous scenario, would have the person securing these future charges with a debit card. Each reservation would have placed a block on the checking account underlying the credit card. Then the flowers, dinner, cab fare and concert tickets would have all generate separate overdraft charges. You must be aware of any checks clearing during the time the blocks are in effect will be blocked. Ouch.
Always maintain a balance well below the usable limit of your credit card to avoid any blocking problems. Although this is prudent advice it may not always be possible considering the somewhat varying amounts and timing of the blocks. One tidbit that is unfaltering is that reservations should not be placed on a debit card. Ever.
Another potentially better technique to avoid this trap is to have a spare credit card. A method used by many, using the spare credit card for all your resrvations thereby saving the credit of your preffered card. Then when the actual charges are made the preffered card can be used and any rewards can be accumulated. An additional benefit is the block transactions provide activity on the spare card furthering its value as a tool to enhance your credit score.
Like many credit related issues, knowledge and a little foresight can go a long way in preventing unexpected problems and expenses. Since now you are aware of the credit block, it would be better to take up pro-active steps to ensure you did not fall into the credit blocking trap.