How Credit Card Holds Work

Jason SteeleUpdated December 16, 2022

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A credit card hold is a temporary freeze on part of your credit line. When you have a hold on your credit card, you cannot use at least part of your credit. You may not realize that a hold has been placed on your card until you try to purchase something with it. Read on to learn more about a credit card hold, why it happens, and how long it lasts.

What Is a Credit Card Hold?

A credit card hold is a temporary hold, or freeze, on your credit line. This means that you’re not able to use the part of your credit line that’s frozen until the hold is lifted and the funds are released. A credit card hold is not the same as an actual charge to your credit card.

How Does a Credit Card Hold Work?

With a credit card hold, your card issuer makes part of your credit line inaccessible to you. There are two types of credit card holds: credit card administrative holds and credit card authorization holds. It’s important to understand both types so you’ll know what to do when they occur.

What Is a Credit Card Administrative Hold?

A credit card administrative hold is a type of credit card hold that your issuer may place on your account if you exceed your credit limit or regularly make late payments. If you have authorized users on a credit card, such as a child or spouse, one of those users could cause an administrative hold to be placed on the account if they exceed the credit limit. You’ll want to make sure that any authorized users on your account understand the importance of responsible spending when using a credit card.

How Long Does a Credit Card Administrative Hold Last?

The length of a credit card administrative hold depends on why the hold was placed. If an administrative hold was enacted because you exceeded your credit limit, the hold will last until you’ve made payments and your account balance is under the limit again. If the administrative hold was due to late payments, the hold will last until you’ve made at least several month’s worth of on-time payments. This is just one of the many things it’s good to know about how credit cards work.

Types of Credit Card Administrative Holds

As we’ve mentioned, there are two types of credit card administrative holds: over-the-credit-limit holds and late-payment holds. Here’s more information about each type of hold.

Over-the-Credit-Limit Hold

If you go over your credit limit, a hold may be placed on your credit card to prevent you from using it. The administrative hold will remain in effect until you pay your card below the credit limit. One of the credit card requirements is sticking to your credit limit.

Late-Payment Hold

If you frequently make late payments on your credit card, your card issuer may place an administrative hold on your account. In this case, you’ll need to make several months of on-time payments before the hold is lifted and you can use the card again. In some instances, a credit card company may cancel your card for repeated late payments. If that happens and you need to find a new card, you may want to look into the best secured credit cards, which might be helpful if you have bad credit.

What Is a Credit Card Authorization Hold?

A credit card authorization hold is one of the credit card terminologies you should know. A credit card authorization hold is when a company puts a hold on a predetermined amount of money in your account to ensure that there are enough funds in your account to cover the expense. Credit card authorization holds are also called pre-authorizations. These holds are common for hotels and car rentals. Recommended: Do You Need a Credit Card to Rent a Car?

How Credit Card Authorization Holds Work

A credit card authorization hold is a multi-step process. Let’s say you’re booking a hotel room. When you book the room, the hotel takes your credit card information and then contacts your credit card issuer. Your issuer puts a hold on a predetermined amount of money in your account, which reduces your credit limit. That predetermined amount is set by the hotel and may be more than the cost of the entire hotel stay. The authorization hold remains on your account until you check out of the hotel. At that point, the exact charge of your hotel room is submitted to your card issuer. As part of how credit card processing works, the funds are then transferred from the credit card issuer to the hotel for payment. This process is similar for car rental companies and gas stations that place credit card authorization holds. Car rental companies may hold more funds than the cost of the car you’re renting in order to cover any potential damage to the car. Gas stations usually have a predetermined amount they hold for every transaction.

How Long Does a Credit Card Authorization Hold Last?

The length of time that a merchant can place a hold on your credit varies. A credit card hold can last for up to a month. However, it is unlikely that a hold will last that long. Merchants typically want to settle transactions quickly to avoid misuse fees charged by Visa and MasterCard for failing to settle authorizations within a set period of time. In the case of a credit card authorization hold made by a hotel, the hold should be lifted within 24 hours after you check out.

When to Use an Authorization Hold

Merchants are likely to use an authorization hold when the final amount of the transaction is unknown. Hotels, gas stations, and car rental companies use authorization holds the most frequently. Merchants whose products are subject to frequent returns may also use an authorization hold to delay finalizing transactions until after the product has been received. That way they can lift the hold rather than issuing a refund.

When Not to Use an Authorization Hold

An authorization hold should only be enacted by a merchant for the situations mentioned above. A merchant should clearly explain their authorization hold policies to customers to prevent confusion, and they should release the holds as soon as possible. If you are uncertain about a merchant’s policy for authorization holds, be sure to ask.

Tips for Navigating Credit Card Authorization Holds

When you’re reserving a hotel room or a rental car, ask about the policy for credit card holds. Find out how much it is and how long the hold will last.

Check the available balance on your credit card to make sure you have enough funds available to use it while the hold is enacted. Consider carrying a second credit card with you as a backup, just in case.

Ask the hotel or rental car company to remove the hold immediately once you settle your bill. However, it’s up to the credit card issuer to actually lift the hold.

Avoiding Credit Card Holds

Sometimes a credit card hold is unavoidable, but there are a few ways that you may be able to get around it or make it easier to deal with.

Pay with cash when you can. This isn’t always convenient, however. And some merchants may require a cash security deposit to cover any incidentals.

Ask about credit card holds in advance, before the merchant processes the transaction. Find out how much the hold will be so you’re aware.
Know your credit card limits and the balance on your card to avoid going over it. Set up alerts on your account to notify you if you’re getting close to your limit.

If you do have a hold placed on your credit card, contact the credit card issuer to request that the hold be lifted once you pay the final bill.

The Takeaway

Credit card holds can be an inconvenience. But once you know what they are and how they work, it can be easier to prepare for and navigate them. That way you can make sure you have enough funds in your account to cover purchases with your card while the hold is in place. If you’re in the market for a new credit card, Lantern by SoFi makes comparing credit cards easier. You just fill out one simple application and you’ll get offers from multiple lenders to help find the best card for your needs.

Frequently Asked Questions

Can a credit card authorization hold prevent chargebacks?

When can you remove an authorization hold?

What can go wrong with an authorization hold?

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About the Author

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.

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