DEFINITION of ‘Credit Card Blocks’
The reserving of a portion of a credit or debit card balance for the cost of services not yet rendered. Credit card blocking is most common in the hospitality industry, but is also used by rental car companies. It is more likely to be used for payments involving services rather than products.
BREAKING DOWN ‘Credit Card Blocks’
Hotels use credit card blocking to ensure that the individual reserving the room is unable to spend the money that is to go into paying the room fee. The hotel may block all or a portion of the room cost before a stay begins or is completed.
When credit card blocking is used, the transaction is posted as pending rather than completed. The total amount blocked may be lower than the actual total, as additional room charges, such as room service, may increase the total amount owed.
Rental car companies may place a hold on a credit card that exceeds the cost of renting the vehicle to cover incidental expenses or damages, even if the renter does not purchase the car insurance offered by the rental car company.
Credit card blocking can have a significant impact on cardholders with low credit limits or who have a small amount of credit remaining. A cardholder may make a reservation for a hotel room weeks in advance, but the hotel may block out the cost of the entire stay as soon as the reservation is made. If the cardholder does not pay attention to reservation language indicating that a credit card block may be employed, he or she may continue using the card despite not having sufficient balance. This can result in overdraft charges.
For example, a three-night reservation that will cost $750 in total may appear as a temporary charge after a reservation is made, even if the hotel stay is not to occur for a while.