Authorization Holds and Credit Cards

Occasionally, you may notice a “hold” or “authorization hold” on your credit card’s activity. It is important to be aware how these can affect your credit card balance and day to day finances.

What is an Authorization Hold?

An authorization hold is when a merchant includes a small charge as a type of placeholder for a future charge. You are most likely to notice authorization holds in online banking, when merchants and credit card companies have yet to reconcile the authorization hold.

When Does An Authorization Hold Occur?

The best way to understand an authorization hold is through an example. Authorization holds frequently occur at gas stations, restaurants, bars, or with other merchants who may not know the final charge when accepting your credit card.

For example, if you were to pay for gas with your credit card, the merchant might put a hold on thirty dollars. This thirty dollars would limit your available credit until the final amount was actually charged in place of the authorization hold.

Wikipedia includes a more complete catalog of examples.

What Should You Watch for with Authorization Holds?

Usually, authorization holds are a seamless part of the process. However, you should consider a few possibilities in which they may create difficulty.

First, occasionally merchants may accidentally double charge an authorization hold. In these cases, you should be sure to check your final statement to see that the amount is correct.

Secondly, if you calibrate your spending according to the stated available balance in your account, you may run into obstacles due to authorization holds. In these relatively rare cases, you should make sure your spending is conservative enough to factor in the eventual charging of the good with an authorization hold.

Managing Authorization Holds

Fortunately, authorization holds typically remain in the background of your day to day finances. However, being aware of them can help prevent confusion and, in some cases, costly mistakes.

This article is part of TakingCredit.com’s credit card glossary. You can learn more about credit through our archive of credit card tips and our credit card blog. Photo by LumaxArt.