How does a credit card hold work?

After checking into a hotel or renting a car, you may notice that the merchant initiated a credit card hold, which locked funds in your account. This preauthorization can be shocking to discover if you don’t know what it means. The good news is that holds are often temporary, so there’s no need to panic.

Here, we explain what credit card holds are, how they work, how long they last and how to avoid them.

What is a credit card hold?

A credit card hold is a temporary hold on part of your credit line that you’re not able to use until funds are released. Two types of credit card holds exist — credit card authorization holds and credit card administrative holds. Here’s how they work:

Credit card authorization holds

A credit card authorization is a pending charge initiated by a company or service provider to ensure the card works and that there are enough funds available to pay your final bill. Hotels, for example, may authorize a certain amount per night as a backup to cover the room rental and incidentals, like food or drinks charged to the room.

For short hotel stays, the final bill may be charged to your card at the end of your stay, and the card company will release the hold at that time. But if you stay for an extended period, the hotel may charge your card for balances due periodically. And if you prepaid for the stay through a service like Booking.com or Hotels.com, there may be no additional charges at checkout – as long as you didn’t use the minibar or charge anything else to the room. Gas stations and car rental agencies are other examples of companies that may process card authorizations.

Credit card administrative holds

A credit card issuer may place an administrative hold on your account if you exceed your credit limit to ensure you don’t use your card until you pay down your balance below your limit. You can also receive an administrative hold if you regularly make late payments — which could lead to your card being canceled altogether.

How long do credit card holds last?

Authorization holds release after you settle a final bill and the transaction clears, which could take several days. Since authorizations for a hotel room or rental car could stick around until you check out or return the car, it’s important to plan for them. Otherwise, you could be left with less room to charge expenses on vacation — and that’s not a good problem to have while miles away from home or abroad.

Administration holds and credit card account suspensions initiated by the card company as an adverse action could last until you pay down the balance. However, you may avoid these holds entirely by keeping up with on-time payments and maintaining a balance under the credit limit.

Tip: If you ever need a credit limit increase to make a purchase, it’s better to contact the card issuer and request it prior to using your card.

How do I remove a credit card hold?

You usually don’t have to do anything to remove merchant credit card authorizations. The merchant will tally up your bill and process the final payment, and your credit card issuer will release the authorized funds. It’s important to note that the merchant itself doesn’t have the power to remove authorizations — it’s up to the credit card issuer to lift the hold.

If you have an administrative hold, you’ll need to pay down your debt first, and you should call your credit company to find out how much you must pay to release the hold and resume regular card use.

Ways to avoid credit card holds

Merchants process credit card holds for assurance that you can pay them for services rendered, so it’s unlikely they’ll grant a request to not preauthorize your card. However, here are ways you may be able to avoid a credit card hold:

Pay in cash. Instead of swiping, consider paying for purchases in cash. Just be aware that some merchants will still ask to hold cash for incidentals. For example, a hotel might ask for a cash security deposit in lieu of a credit card.

Ask about holds on a credit card in advance. To avoid any surprises, ask merchants how much they might hold on your credit card before they process the transaction.

Know your balance and credit limit. Keep tabs on your credit card limit to avoid a hold for going over the balance, and consider setting up spending alerts to give you a heads up if you’re getting close to the limit.

Ask for the hold to be removed immediately after paying your bill. Once you pay the final bill from a merchant, consider contacting your credit card issuer to request that the hold be removed.