Beware the 'Hold' on Your Credit Card

You may be closer to your credit card's limit than you think -- because of charges you didn't even incur.

Some merchants charge a deposit on your card and can be slow to remove it. And that could spell trouble if your card balance is approaching a credit limit.

I was reminded of this fact in a rather unpleasant manner a few weeks ago, when my American Express ( AXP) card was rejected at a restaurant because of holds that remained from a recent hotel stay.

A hold, or block, occurs when the hotel, rental-car agency or other company contacts your card issuer to give an estimated total of the charges. If the transaction is approved, your available credit is reduced by this amount. Once you pay your bill, the final charge should replace the block within a day or two.

Here's what happened: I stayed at a Sheraton hotel in Baltimore and paid for my room, plus that of a colleague, with my Starwood ( HOT) Preferred Guest AmEx. The hotel added holds for each of the rooms, which were still on my card a full four days after I checked out.

Sheyna Bonnity, a customer-service representative at AmEx, told me the holds were for $836, $650, $627 and $50 -- and that the $650 and $627 holds were still on there the Saturday night after Tuesday checkout. That's $1,277 of holds left on a card with a not-so-high $2,300 limit. It is no wonder I exceeded the credit limit.

When I called the hotel, someone named Kelly told me that, "When you checked out, the funds should have been returned to you," noting that "we're not holding the funds -- it's the bank."

Kelly's supervisor, Tia, echoed that line of reasoning: "Once you've checked out with us, that very night, we release the funds." She then said, "It is up to the bank as to how long it takes to release the funds back to you," adding that "usually, this only happens with debit cards."

AmEx spokeswoman Mona Hamouly said the holds are a "way of managing risk," and that they are generally removed as soon as the final charge has been settled.

AmEx isn't alone in this practice. This can happen to holders of cards from Visa ( V), MasterCard ( MA), Discover ( DFS) and others, as well.

Discover Financial Services spokesman Matthew Towson notes that "many hotels or restaurants may do all their paperwork at the end of the week, so the charges may not be submitted for approval until four to five days later. Once the charges have been approved, the hold will be removed."

The holds may not last as long on other cards as they did on my AmEx. Visa Inc. spokesman Paul Wilke said in a statement: "Visa requires that card-issuing financial institutions release all holds within three business days of the authorization request or when the transaction clears, whichever is earlier." He also noted that "Visa does not issue cards and, thus, does not place 'holds' on cardholder funds. The financial institutions that issue Visa cards decide whether to place holds on cardholder funds."

The Federal Trade Commission has a Web site that talks about holds. It says hotels and rental-car companies are the most likely to block out money.

So, if you're staying at a Marriott ( MAR) or Hilton ( HLT), or renting a car from a place such as Avis ( CAR), you'll want to watch for these holds.

Holds at gas stations have also made news in recent months. An industry group maintains that the retailers themselves are not responsible for the amount or length of the holds. Still, make sure you have enough room on your card before filling up at a BP ( BP), Conoco ( COP) or Mobil ( XOM) station.

The FTC says the problem of the delayed removal of holds usually occurs when someone pays for the service with a different card than was used to reserve it. That was not true in my case.

The agency also suggests shopping around for credit and debit cards, and asking the issuers if they permit blocks, for how long and from what types of merchants, saying, "You may want to consider an issuer that uses shorter blocks."

You can compare credit cards, savings rates and more at

If you notice a hold remaining on your card, Discover spokesman Towson says you can take action to have it removed. He suggests that "once a consumer has done business with the merchant (i.e. hotel, restaurant, gas station), they can contact the merchant and ask them to contact the credit card company to have the hold charge removed if it is still appearing on their credit card after a few days."

An interesting side note: When I called AmEx from the restaurant, I asked if my credit limit could be increased, and was told that I could put in an application, but it would take several days to take effect. Yet, when I later went to the AmEx Web site and asked to increase my credit limit to $5,000, I was asked for income data. I was then told that I was approved and would be able to use the new limit within 15 minutes.

So, either the Web site has greater capabilities than the customer-service representatives, or the rep on the phone wasn't inclined to help me pay for my dinner on that credit card.

Good thing I was carrying enough cash to pay the bill.

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