How Do Hotel Credit Card Holds Work?
Any time you check into a hotel, the front desk clerk will ask how you would like to pay for your room. Whether you use the card with which you reserved the room or swipe a new one, there will be a hold placed on your credit card. If you log-in to your account via your issuer’s mobile app or website, you will likely find that a hold has been placed on your card, which may be in a dollar amount higher than the nightly rate. This may leave you wondering how these holds work and when funds will be released back into your account.
Generally, the hotel will place a hold on your account that is equal to the price of the room, plus tax, and an additional fee of $50 to $200 a day to cover parking or other incidentals, such as room service or mini-bar purchases. If you do not make any additional purchases, you will only be charged for the room and tax when you check out.
The reason hotels place this hold is to ensure that there is a high enough credit limit on your card to cover any charges. The hotel also wants some assurance they can bill you if you destroy the room. The hold will disappear about 24 hours after checkout.
It is important to know the hotel hold will not affect your credit score, as it will not be used in calculating your credit utilization. The second-most important factor in determining your credit score is your credit utilization, or debt-to-available credit ratio. If you are using over 30% of your available credit, your score will decrease. However, the credit bureaus use the balance on your credit card after the statement has closed for the month, which does not include holds.
However, a hold will decrease the amount you have available to spend on your card. If your card limit is $2,000, and a hotel places a hold for $600 on your card, you will have only $1,400 available to spend. This is why many guests are unhappy with the holds. If you are traveling on a tight budget, and do not plan on using room service, the hotel is limiting access to funds you could use on something else.
Consumers are not powerless, though. When you check-in to the hotel, you can ask that the hold placed on your card be equal to the nightly rate and tax. If the manager insists on holding some additional fees, you can request these be as minimal as possible.
It is also always a good idea to travel with more than one card, particularly if you are in a foreign country. While Mastercard and Visa are accepted almost everywhere in the world, there is always a chance your brand may not be accepted. Additionally, if the hotel does insist on putting a large hold on your card, you will have another method of payment while you are traveling.