- 1 Here’s Why Hotels Put That Mysterious ‘Hold’ on Your Credit Card
- 2 How to Use a Credit Card & Rewards Wisely – 6 Tricks to Outsmart Credit Card Companies
- 3 How Does Being an Authorized User Affect My Credit Score?
Here’s Why Hotels Put That Mysterious ‘Hold’ on Your Credit Card
Many hotels place a pending charge on your credit card that's far in excess of the cost of the room.
Photo (cc) by Tim Evanson
It’s like an episode of “Unsolved Mysteries” that plays itself endlessly for travelers.
It happened to Judith Searcy when she stayed at the Portland Marriott Downtown Waterfront in Oregon this summer. If you check your credit card statement, you may find that it has happened to you, too.
For Searcy, the mystery was a $518 pending charge to her card after she checked out of the Marriott. “I had not been told of this charge, nor did I have any documentation for it,” says Searcy, who is retired and lives in Austin. She phoned Marriott, which asked her to leave a voice mail for a manager.
Days later, the $518 charge disappeared.
Identifying this mystery is easy, but solving it isn’t. There’s an explanation for these charges, and a valid reason for having them. But they can also be frustrating to hotel guests, especially those who receive unexpected alerts from their credit card companies. And they raise the question: Is there a better way?
Unlike most other travelers, who might have been content with the reversal, Searcy asked for an explanation. She finally received one after reaching Tiffany Bush, the hotel’s general accountant. Turns out the charge was a routine credit card “hold.9rdquo;
“This charge happened at check-in when your card was first swiped and our system automatically authorizes for possible incidental charges,” Bush wrote in an email. “Our system will continue to check that the card has enough funds as you add charges to your room.”
Marriott, like other hotels, discloses the hold at check-in. “Credit card holds are typically released within 24 hours of checking out,” says Marriott spokesman John Wolf, who notes that holds are an industry-wide practice, common among hotels and car rental companies.
Most hotels place a hold on your credit card, according to Dale Blosser, a lodging consultant. The amount varies, but as a rule, it’s the cost of the room, including tax, plus a set charge of between $50 and $200 per day. “That basically establishes a line of credit for typical items that the guest might charge to the room, such as room service, restaurant or bar charges, gift shop merchandise or valet parking fees,” Blosser says.
There’s another reason for a hold: It’s a security deposit of sorts, in case you trash the room. “It9rsquo;s a way to [ensure] against damage or loss,” says Kari Luckett, a financial expert who edits the credit card website CompareCards.com. The more expensive the room, the greater chance you’ll experience a generous hold, she adds. “It9rsquo;s usually from five-star hotels and hotels that pack the room with food and drinks or offer room service or concierge.”
But that’s just one part of the mystery. The other is what happens behind the scenes with your credit or debit card.
How to Use a Credit Card & Rewards Wisely – 6 Tricks to Outsmart Credit Card Companies
Due to the recent economic recession, people have become more and more displeased with their banks. High interest rates, credit card fees, and poor customer service have left them clamoring for change and better treatment. The recent Credit CARD Act of 2009 is a step in the right direction, but it’s not an all encompassing fix.
Luckily, there is minority of people who have found ways to outsmart their credit card issuers and make the system, flaws and all, work for them. As one of those knowledgeable few, allow me to share a few credit card tricks I’ve learned along the way.
This is the holy grail of credit card use. As long as you pay your balance on time and in full every month, you will never pay a dime in interest or fees. Better yet, you will be earning interest on the cash you held onto from the time you make your purchase, to the time your statement becomes due. That’s up to 50 days in interest gains!
Tip: Register online for instant access to current account information. Log in frequently to ensure that you are not spending more than you can afford, and to pay in full when your statement comes due. Set up an automatic payment plan to ensure that you never miss a deadline.
Let’s say that you are unable to pay your balance in full every month, but you are steadily reducing your total debt. You’d like to be able to take advantage of the perks credit cards have to offer, but you don’t want to increase your debt load.
If you only have one card to begin with, and are already in debt, you should focus on paying that card off before opening any new accounts. However, if you have more than one credit card, there is a way to continue to pay down your existing debt without incurring interest on new purchases.
The key is to keep one card “clean9rdquo; by paying its balance in full every month. As stated above, when you pay a card off each billing cycle, you avoid paying any interest or fees. This is not so if you continue to charge new purchases to cards that are already carrying a balance. When you carry a balance on a card, you incur interest on all new charges to that card at the moment of purchase.
Thus, as long as you pay the balance of the “clean9rdquo; card in full every month, you can use it without worrying about incurring interest on your purchases. Just make sure that you never spend more on the “clean9rdquo; card than you can easily pay for in full, while paying more than the minimum on your cards that carry a balance.
Tip: Don’t make non-essential purchases while you’re still in credit card debt. If you’re not disciplined enough to limit what you spend when paying with a credit card, the best solution is to pay for everything in cash or with a debit card while you are paying off your debt.
If your pay your balance in full every month, you are getting a free loan from your bank from the time of purchase to the due date for that payment cycle. Federal Law now requires that banks offer a 21 day grace period between the date your statement closes and the date your bill is due.
As a result, if you make a purchase a day before your cycle closing date, you will have 21 days to pay for it before incurring interest. Complete a transaction the day after the cycle closes, and you will have an additional month until the next cycle closes, plus another 21 days to to pay off your balance.
Tip: When you get towards the end of your cycle, it pays to hold off on major purchases. By delaying your spending just a few days, you can gain an additional month of time until your payment is due.
4. When Traveling Outside the Country, Use the Right Card
I use my Starwood Preferred Guest Card from American Express (a Money Crashers partner) all over the U.S. because the Starpoints I earn when making a purchase are very valuable to me. But, when I leave the country, that card stays tucked deep inside my wallet and I instead use my Capital One card instead.
Why? My American Express card charges a 2.7% foreign transaction fee, which negates all the value of my rewards. Capital One is one of the few cards that doesn’t charge any foreign transaction fees at all. Thankfully, consumers are learning that these fees are a ripoff and, like me, are refusing to use the cards when traveling. Due to this growing customer dissatisfaction, it looks like American Express and other companies are getting the message.
Recently, American Express announced they would drop these fees, but only on their Platinum and Centurion cards. Citigroup also announced that they would eliminate these fees on a number of their cards. Choose a fee-free card on your travels and deny your credit card company the opportunity to take your money.
Tip: When planning a trip outside the United States, contact your credit card companies and ask them what their foreign transaction fee is. It is also a good idea to inform them where and when you are traveling so they do not suspect you’re a victim of credit card fraud.
Big spenders earn plenty of rewards each month, but the rest of us have to be more creative. The real credit card gurus out there have learned two simple lessons from the economic troubles of the last few years.
- Airlines need to unload. Troubled airlines become so desperate, they are willing to sell frequent flier miles by the millions to banks for cold hard cash, creating additional rewards for consumers.
- Anything to draw you in. Banks are so anxious to find new customers with good credit that they have been doling out unprecedented sign-up bonuses to attract them. For example, one bank recently offered 75,000 miles on American Airlines to sign up for a credit card.
The result has been a bonanza for card holders with good credit who can wait patiently for the best deals. Because your credit rating can suffer if you frequently open up new accounts, the experts always keep their powder dry before pulling the trigger.
Tip: Do not accept that cashier’s offer to save 10% on a smaller purchase when you open a retail store credit card. Apply sparingly, only for the credit cards with exceptional sign-up bonuses, in order to maintain your credit rating.
If you want to get a new cable television or Internet service provider, you are lucky if you have one or two other companies to choose from. On the other hand, if you want to change credit cards, you have hundreds of different options available to you.
Even customers with subpar credit scores can expect their mailboxes to be full of credit card solicitations. As tempting as these can be, keep in mind that you don’t want to change credit cards like you change socks. Too much of this activity can affect your credit score and make it difficult to track your spending.
That being said, sometimes a change is necessary, whether it be for better customer service, or better rates and card perks. If your bank fails to meet your needs for any reason, you should not hesitate to end the relationship and move on.
Tip: When you shift your spending to a different card, try to keep your dormant account open until the annual fee is due. This will maximize the average length of your credit history, and in turn, improve your credit score.
Like any other business, credit card companies are out to make money. Unfortunately, their tactics often involve creating rules that take advantage of consumers. Don’t use your cards blindly. Learn about additional fees you may incur, and pay your balance off each month to avoid interest. Take advantage of any perks you can to be sure your credit cards are acting as the valuable financial tools they should be.
What are some ways you’ve found to outsmart the credit card companies? Give your tips and tricks in the comments below.
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
How Does Being an Authorized User Affect My Credit Score?
A reader writes in looking for advice on whether or not becoming an authorized user on a credit card will help his credit scores. John Ulzheimer, credit expert for Credit Sesame, answers.
“John, I’m trying to build up my credit score and I read online that if I can get my name added to my parents’ credit card that it will help my credit scores as an authorized user. Is that true? What is an authorized user account and what does it hold me responsible for?”
Quick Tip: You can see your free credit score online now on Creditsesame.com without impacting your credit report card. CreditSesame.com also updates your score monthly, and includes free credit monitoring and identity theft protection to help you monitor, manage and protect your credit and identity — No Credit Card, No Trial.
The common question “do authorized users build credit?” is a simple question with a not so simple answer. The “authorized user” strategy is one of the most commonly used methods by people who want to build their credit from scratch and by people who are trying to rebuild their credit after some sort of credit disaster. The strategy is equally effective for both scenarios, and here’s how it works.
You will have your name added to the existing credit card account belonging to another person. But rather than being a co-signer or a joint cardholder, you’re added as an authorized user. A few days later a card with your name on it will be sent to the primary cardholder, who is usually your spouse or one of your parents. Once the card is activated you’ll have the same buying power as the primary cardholder.
As an authorized signer on a credit card, you are not held liable for the charges or balance on the account. That means you will never be asked to pony up any money to cover the payments. That responsibility will always remain with the primary cardholder and any co-obligors on the account.
Within a few months the history associated with the account will be added to your credit reports. While this is commonly done, it’s not 100% universal. Check with the credit card issuer regarding their credit reporting practices for an authorized user account to make sure they’ll report the account on the authorized user’s credit reports.
When the account is added to your credit reports it will immediately be considered by credit scoring systems. It will be measured on par with all of your other accounts, meaning it’s not discounted simply because you’re an authorized user. The only exception is if FICO’s newer scoring models believe you’re simply trying to game the system by having your name added to the account.
FICO hasn’t provided any public detail on that aspect of their scoring logic but many believe they’ve figured out a way to sniff out scenarios where people have been adding an authorized user to credit card accounts where there’s no legitimate relationship between the two consumers. This process is called “piggybacking” and is an attempt to game the credit scoring system. It’s not much of a problem today but several years ago it was all the rage.
You’re going to want to have your name added to a credit card account that is old, has a low balance relative to the credit limit, and has always been paid on time. These aspects of the account are very helpful to your credit scores. In fact, you could see your credit scores improve considerably, depending on your individual scenario. This is because when you are an authorized user, the account and all of the information associated with it, will show up on your credit report as a tradeline.
The best part of being an authorized user is the fact that you have no liability for the account. That means if the primary cardholder does something irresponsible with the account, like miss payments or max out the card, you can easily have your name removed from the account. When a name is removed from the account it’s fairly easy to remove authorized user from credit report as well.
Be aware, however, that the authorized user strategy will run its useful course and then it’s time to establish accounts in your own name. There are some lenders that will want to see that you’ve been a liable party on credit cards before they’ll extend credit. So, you can’t just have your name added to other accounts and assume you’re done building credit.
Give yourself a couple of years and then it’s time to apply for a credit card as the primary cardholder. You may not get terms as aggressive right out of the gate but as long as you make your payments on time you’ll be surprised how quickly credit card issuers will adjust your account attributes, like the credit limit. And you’ll be able to thank the authorized user strategy for helping to get your credit journey started.