Everything you need to know about credit card holds

Although credit card holds generally have an underlying definition or meaning, it is essential to note that there are two types of it. Now, irrespective of what type you're referring to, however, what is common to both is the fact that the funds on a credit card are not released for use, at a particular instance or time. We may refer to it, as a temporary action that hinders a legal credit card owner, from accessing the available funds on their card.

What exactly is a credit card hold?

Firstly, there is the authorization hold- in which certain funds on your credit card are declared unavailable to you because a merchant placed a used restraint on it. The administrative hold on another hand is that in which your bank placed the restriction, because of an unresolved issue- that usually may arise from a number of instances.

Over the years, a lot of credit card users have had complains about the seeming confusions caused by credit card holds. The reason for this is primarily because a singular factor does not definitely cause credit card holds. Consequently, consumers need to understand what type of hold is placed on their credit card when they notice one, to know the right line of action to take. Before you can do this, you need to adequately understand the details of the two types of credit card hold, and the circumstances surrounding each.

Administrative credit card hold explained!

In the administrative credit card hold, the restrictions are considerably nonconnected to a third party. The card hold actions are taken, by a direct initiative of the issuing bank, or company- that manages the credit card account. Since there is no third party involvement- such as a payment receiving merchant, administrative holds are the least complex and are quite easier to resolve than the other credit card hold type.

However, administrative credit card hold is further of two types, namely:

The administrative hold that is necessitated by a user’s credit limits

If you’re applying for a credit card from any of the card issuers via an issuing bank, a credit limit is granted on your card. This limit determines how much overdraft you can make on your account, at any time. In fact, the credit limit may be considered as a framework used by the bank for helping its customers meet their numerous payment schedules- for which they may not always readily have the funds. However, the ideal way to go about this- in such a way that the bank also protects itself, is to use the determined credit limit as an issuance yardstick. Credit limits for your account cards are calculated and fixed, based on several considerations. The determinants of your credit card limits, include your antecedent and current job standings, credit reports and credit score, current income to debt ratio, as well as a few other factors. Note that credit limits are very important elements in the use of a credit card, and this is why your card issuer makes no mistake- when fixing one for your card.

Once your credit limit is defined, you may effect payment transactions on that card- to the tune of its credit limit, and no more. Attempting to push up over your credit limit, consequently makes your bank hit the hold buttons on it. In most cases, this type of administrative holds on your credit card means you wouldn’t be able to make use of the card for any payment transactions, whatsoever. These holds are however removed in a short period, but this is largely dependent on the account service provider, and the particular amount of debt to be paid.

The best approach to removing this type of administrative hold on your credit card is to contact your local bank branch, to lodge the complaints. Investigations on credit card hold issues don’t take long to figure out, so you can have the reasons sorted out within a few minutes. You’re most likely going to have to strike an agreement with the bank, on what repayment plan you want to adopt. The options are usually either of a lump sum one-time payment or an installment plan- spread across days.

Administrative hold because of late credit line payments

When leveraging on credit line benefits on your credit card, always know that the financial lending house mandatorily expects to get their money back- promptly and based on the agreements reached. However, it shouldn’t surprise you, that many people repeatedly fail to meet the repayment schedules for their credit card debt. Credit card issuing firms, have found and are still making efforts to find more effective ways of sanctioning payment defaulters. When you notice an administrative hold on your credit card, one of the first things to think about, is whether you made your last payment to time. Although there may be other penalties for late payment- such as added interests on expected repayments, one most imminent penalty, is an administrative hold on the credit card. Since the credit card owner is not able to repay an initial overdraft to time, the card issuer blocks the user’s access to using another credit line advantage. After all- if allowed, they would only accumulate huge debt for themselves, and possibly make the financial company run into a loss. Note that this administrative hold action may still be implemented, even if the said funds were subsequently paid- on a date later than agreed.

Now, the way your card issuing company handles the situation, and the outcomes, are significantly determined by such factors as your credit history- from over time. Basically, there are two possible scenarios here, and the reasons for concern are built around them:

✓ While you’re allowed to continue using the credit card, your late payment could, however, affect your credit score.

In this instance, the issuing company’s action seems to be of minimal effect on your credit card use, although the ill effects only appear in a different form. If your card issuing company decides to send a notification to the credit reporting agencies- such as the Equifax or Transunion, their assessment and judgments on your credit score rating would always show to your potential lenders. This consequently has its own effects on your ability to secure loans and payment discounts on your other transactions, in the future.

Since the conditions in this category are not as severe as it can get, the option is somewhat reserved for credit card payment defaulters, who have had a previous clean sheet. Thus, if it is your first time of missing the payment dates- and you’ve had previous good credit scores, then you’re likely to qualify for the treatment in this category.

On another hand, if the credit card company affects a hold on your credit card- for a one-time payment default, you may be able to make them remove the hold if you’re able to convince the company of your good antecedence. You may achieve this, by presenting them with on-time payment records of previous months and years.

✓ The credit card company issues an administrative hold on the card, while also negatively affecting the user’s credit score.

This is definitely the worse of the two hold scenarios for a credit card- as far as this subcategory of administrative credit card hold, is concerned. If you’ve continued to skip payment dates on your credit cards, then you’re more likely to get this treatment- when your credit card company decides to go tough. The defaulter, in this case, gets a bad credit score- that reasonably hinders them from being able to borrow money from persons or financial institutions, as well as their credit card been blocked from payment use.

Consistently not meeting up to payment schedules, attracts the height of sanctions that a credit card issuing company can give. If the company can establish that the card owner has maintained the culture of not making their required payments- whether deliberately or not, they may cancel the user’s card and withdraw their services.

How to avoid administrative holds on your credit card

The next question anyone may ask is how to protect themselves from being put on hold effectively. You’ll agree, that it’s safer to put some precautionary measures in place, than trying to get yourself out of the hold- when it’s already done.

The following are two measures that you’ll find, useful. Note that these solutions, applies to all administrative hold types:

✓ Always have a reminder alert feature from the credit card company, that indicates whenever you’re about to make transactions that are above your allowed credit line. This would restrain you, or make you weigh your choices more carefully.

✓ You may set an automatic deduction on your checking account so that the payments are always made to time. This would help because you don’t necessarily need to remember to initiate the payment on the said day before it is made. However, the checking account must be funded at this time, so that the payment can go through to the card company.

Authorization credit card hold explained!

This is the second broad category of credit card hold that anyone may experience on their everyday credit cards. However, the reasons for this type of hold, are way different from what it is, in the administrative hold. While the administrative holds are made in a bid to resolve apparent issues, the authorization holds are made as normal procedures of transactions- when you decide to make payments using your credit card. Since more people now make electronic payments via their credit cards, there have been increased complains of this type of credit card hold. Consequently, you should expect that this type of hold occurs more frequently on the average- than administrative hold.

Note that authorization holds, however- which are also commonly being referred to as preauthorization, are more complicated than the administrative credit card hold. One significant contrast between them is the fact that authorization holds involves a third party- which is absent in the administrative type.

In fact, authorization holds are specifically designed to serve as a measure for verifying electronic transactions. This provision intends to help ensure that merchants who adopted electronic means of receiving payments are protected from suspicious transactions- where their customers or clients pay with credit cards that are not in good payment standing. Since an authorization hold by a merchant is successful, the merchant has no financial issues as an excuse for not attending to you. This is because the hold serves as a confirmation from your credit card issuer- that the required sums are available in your possession. If you’re a regular credit card user, then it’s most likely that you’ll have had the authorization holds, at least a few times before.

Authorization holds are carried out primarily by merchants- at the instance that you’re initiating a goods or service transaction with them and on your permission. Unlike the administrative hold where the card issuing company effects the hold on a credit card- sometimes without a prior warning, the merchant does here, and on your permission. In this hold, the merchant asks your card issuer to keep off a certain amount from being accessible by you, because of a transaction you initiated with them. Now, although the funds are still in your accounts at this time, you cannot make use of them.

Usually, when authorization holds of this manner are made, the funds that are kept off, are more than you’re actually required to pay the merchant. This means that asides the funds that you owe the seller, you also would not be able to access a little more money on your credit card. Consequently, these methods can rightly be referred to as some form of security deposit- that remains so, until the transactions between you and the merchant are finally concluded. The authorization hold is the merchant’s way of protecting themselves, from one of the resultant risks of participation in electronic payment transfers.

If for any reason your authorization hold is declined or unapproved, the reasons for this are made known to the initiating merchant- who discloses same to you. Hence, if the reasons are something you can correct, he allows you to do the same before proceeding. For instance, if the credit card authorization hold was partially approved, then it could be that you have insufficient funds on the card, and you may proceed to pay cash to the merchant, at that point.

Pre-authorization is common transaction features in hotel lodge payments, gas stations, car rentals, amongst others.

Steps and procedures in an authorization hold

The following is an outline of how any authorization hold, goes on your credit card. The basic procedures are quite simple, and you can now know what exactly is going on- the next time you use your credit card for payment purposes.

✓ When a merchant or service provider is about to place an authorization order on your credit card, they ask you for your card number, security code, and the card expiration date.

✓ Upon initiation of the hold, your card issuing company places a hold on a certain amount of money that is on your account. The hold is not necessarily total since you can still make use of your credit card, as well as access the remaining funds on it.

✓ Know that the amounts on hold, are usually more than the amount to pay, and the merchant always predetermines them.

✓ The authorization holds for the set amount of money remains so, for as long as the transaction is still in progress. Hence, if for instance, you’re staying at the hotel for a week or a month, the authorization holds remain on the set sums until the duration is over.

✓ All authorization holds are released once the transaction between you and the service provider, is complete.

✓ Consequently, the exact amount that you’re required to pay for the service you received is submitted to the credit card company, for subsequent settling of the merchant.

✓ The correct funds are then transferred to the merchant- who initiated the hold.

Note that the time taken for your hold to fall off depends on the time required by the bank to proceed and send the merchant’s payment. If the payments have not been sent, then the authorization holds remain, until the paying bank can complete the processes. The number of days this may take is not definite, and it depends on your bank policies and its preauthorization processing speeds.

Also, note that multiple authorizations hold may be created on your credit card at the same time and by the same merchant. In a situation like this, each of the authorization holds is treated separately, and you may expect one authorization hold lasting longer than the other. Irrespective of what company, firm, or service provider you’re patronizing, the authorization holds would most likely follow these same patterns, with a very few exceptions.

Now, although these procedures seem simple enough, many people think that authorization holds on their credit cards, are significantly complex to use and understand. This actually may be true if you don’t have the full information on how to handle merchants' authorization holds. Some of the commons complain are the supposed unadjustable hold amounts, and the period before a hold setting falls off. Note that there are several factors in the hold, that you can significantly influence. This would make the holds less mysterious, and well planned to suit your spending desires.

Useful tips on how to go about any credit card authorization hold

Merchants and service providers would always use authorization holds- as far as electronic payment transactions are concerned. However, you can significantly protect yourself from the undesired traits, that have characterized some people’s experiences with authorization holds.

Check the following tips to see how they can be of use to you:

✓ Never proceed on an electronic payment transaction via your credit card, without asking the merchant about the details of their own credit card authorization hold policies.

✓ Always ask the merchant for the amounts that they would be putting on hold, on your card. Remember that the merchant predetermines the hold monies, so you can strike a bargain with them on how much should be restricted.

✓ Whenever you intend to make a payment via credit card, always go with a second card- in case the first is declined due to insufficient balance. Ensure that the funds on your card are more than the amount you’re expecting to pay for the goods or services you’re buying.

✓ Confirm when the merchant or service provider is expected to remove their hold so that you can also be able to make your future spending plans well.

All of these tips make you prepare for what to expect, and how to reduce the possible inconveniencing effects, they may have on you. It also helps you know whether to continue with a credit card payment or look for alternative payment means.

How to ultimately avoid credit card holds

The ultimate way to stir clear of credit card holds and related issues, is to reduce your card payments. If you’re able to utilize the old and relatively inconvenient methods of immediately paying cash for transactions, then there would be reduced need for any hold on your credit card.

Non-electronic transaction payments ensure that you’ll only be buying goods that you readily can afford. Consequently, there wouldn’t be reasons to spend over your credit limits. This also means that you would be paying your merchant and service providers immediately- and without a need for the hold restrictions on your remaining funds.

However, the contemporary world is driving towards a direction where credit card payments cannot be avoided. Hence, the best approach for you is to be proactive enough as regards your credit card use. You should use both electronic and non-electronic payment methods- interchangeably, as that is where the balance lies.