Photo: Brittany Bush via Flickr
We’ve all been there.After renting a car or checking into a hotel, you head to the store to make a small purchase. You hand over your your credit card and wait for the receipt, just as the cashier turns around slowly, lips pursed.
“Sorry, but your card was declined.”
Prickling with embarrassment, you ignore the line of nosy customers behind you and rush out to check your account balance on your phone. Just as you thought, you have more than enough to cover your purchase.
Like millions of consumers each day, you were just card blocked.
Card blocking is a perfectly legal practice used by retailers to put a hold on a certain amount of money in your account once you’ve made an advance purchase.
Car rental agencies, hotels and even gas stations will often “debit” your account for however much your expected charges will be, which sends a signal to your bank to temporarily deduct the funds. Once you’ve turned over the car keys or checked out, the charge will be replaced by the final price.
It’s a type of insurance that they’ll get their money even if you skip town, says financial advisor Chris Zeches, of Zeches Financial.
The only plus to card blocking is that banks are able to freeze your account if any fraudulent activity pops up. Otherwise, it’s a pretty big pain.
“Businesses do this because they want to make sure they get paid,” Zeches says. “(The charge) may show up on your account, but I’m not sure if it’s always going to be there or not.”
Zeches offers five ways to prepare yourself:
1. When it doubt, just ask. When you’re making a hotel reservation, ask the clerk to let you know if they plan on putting a hold on your account and what the amount will be. Don’t let yourself be surprised when you try to use the card and realise half your funds have disappeared. Like Zeches says, you won’t always see the charge on your account right away even though it could still be there. Check your balance often if you’re unsure.
2. Use the same card. If you make a reservation or rent a car, be sure to use the same card when you close the transaction. Blocked funds can take up to two weeks to disappear from your account and you don’t want two cards charged separately for the same purchase.
3. Always have a Plan B. Carry a second credit or debit card, Zeches says. “If one card is denied or you go over your limit, you’ll have a second card you can continue your vacation on.” Carrying extra cash is also a smart idea, Zeches says, just in case both of your cards are jeopardized or you need funds for an emergency purchase.
4. Tell your bank what to expect. If you’re travelling or know that you’ll be shopping at several stores in a short period of time, you should call your bank and alert them in advance. Otherwise, they’re liable to interpret speedy or out-of-town spending as a fraud attempt and put a freeze on your account. That would certainly put a damper on your holiday shopping plans.
5. Pay upfront. If you’re booking a hotel, try paying upfront rather than at check out. That way, you’ll see the funds have been charged and won’t have to keep reminding yourself that you’ve spent that money.
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