(Prescott, AZ – February 16, 2012) Credit is a convenience that provides consumers the ability to charge a meal, make a hotel reservation, or charge gas at the pump by using a credit or debit card. However, when dining out at a fancy restaurant or spending the night in a hotel and using a card, it’s important for consumers to be aware of what the banking industry calls an “authorization hold.”

“Recently, a consumer contacted BBB of Southern Arizona to complain about a restaurant putting through a charge equal to his bill plus 20%, even though he had left the server’s tip in cash,” said Matthew Fehling, BBB President/CEO. “While this may be an extreme case, it is important for consumers to be aware of these common and legal holding practices in the marketplace.”

How it works

According to the Federal Trade Commission (FTC), when a credit or debit card is used for certain transactions such as renting a car or checking into a hotel, clerks often contact the card issuer to provide an estimated total. If the card is approved, the balance is deducted from the card – holding or blocking the funds.

For instance, when dining out at a fancy restaurant, a credit or debit card may be charged the amount of the bill plus the expected tip amount. A restaurant bill of $100 might be swiped for $120, assuming the consumer will add a nice tip to the bill, putting an authorization hold for $120. If the tip is left in cash, the bank or credit card company will still “hold” $120 for a few days until the actual amount is processed, leaving the consumer without access to the $20. For consumers who are close to their credit limit, it could mean a declined purchase, or if using a debit card, the hold could result in a bounced check and overdrafts fees.

In the case of a hotel stay, once a credit card is provided at check in, holds can be placed based on the expected total bill. The hold can include charges for taxes, incidentals, and in some cases the total amount of a consumer’s stay. If staying for several nights, it could leave consumers without access to a considerable amount, which can be a problem when traveling.

Consumers have also reported “authorization holds” after filling up their tank at local gas stations. The holds range from $50 to $75.

Tips for handling “authorization holds”

While some credit card processors discourage vendors from placing these holds, as long as the vendor notifies customers of the practice they are allowed to perform them. To avoid being taken by surprise, BBB offers consumers the following tips:

• Keep track of your credit and bank accounts online, especially when traveling.
• Read the fine print on hotel agreements.
• Pay your check and tip together with either credit or cash, but do not use both when dining out.
• Keep a “cushion” of available funds on credit cards by paying off the balance regularly.
• Whenever in doubt, ask whether a hold will be place on your card, especially when pumping gas.

For more consumer information you can trust, visit www.bbb.org/news.

About BBB Serving Central, Northern & Western Arizona

BBB is an unbiased organization that sets and upholds high standards for fair and honest business behavior. Businesses that earn BBB accreditation contractually agree and adhere to the organization’s high standards of ethical business behavior. Incorporated locally in 1938, today your BBB serves communities in Central, Northern and Western Arizona, supported by over 9,400 BBB Accredited Businesses. BBB provides objective advice, free business BBB Business ReviewsTM and charity BBB Wise Giving ReportsTM, and educational information on topics affecting marketplace trust.