What is a credit card hold?

Credit card accounts can be subject to two types of holds. These include authorization and administrative holds. Issuers place these holds for different reasons, but they both mean that the funds in your credit account are unavailable until the hold either falls off or settles.

What is a credit card authorization hold?

An authorization or pre-authorization hold occurs when a merchant verifies that sufficient funds are available in your account for an electronic transaction. They put a temporary lock on a certain amount of your balance until you settle the payment. This appears as a pending charge on your account.

When you make a transaction with your credit or debit card, the funds are not transferred immediately. The transfer only occurs when the merchant submits a batch of transactions to the bank. This can take several days, meaning authorization holds are essential for merchants to protect against losses.

Preauthorizations are common with payments for hotel bookings, car rentals, and petrol purchases at self-pay pumps. The hold can sometimes be more expensive than the total amount due. Merchants can place multiple holds or hold a predetermined amount, which acts as a type of security deposit. For example, hotels may use them to cover potential damage or incidental costs like room service or mini-bar items.

How long does a credit authorization last?

Time limits for authorization holds vary by merchant and transaction type. Depending on the issuing bank, a credit card hold can be in place for up to a month.

This is unlikely though, as most merchants will settle transactions in a timely manner to avoid ‘misuse fees’. Visa and MasterCard can impose these fees if merchants fail to settle authorizations within set time periods. In the case of hotels, for example, most holds should clear within 24-hours of checkout.

To reduce the risk of authorization holds limiting your available funds and causing you to exceed your credit limit, ask the merchant for the full cost of holds before you make any bookings. Request that they clear the hold as soon as you pay the bill or, if this is not possible, find out how long the hold could be in effect.

Banking alerts from your credit card issuer can also be a helpful way of keeping track of authorization holds. They can notify you when merchants place holds on your account and when they release them.

What is a credit card administrative hold?

The other type of credit card hold that you could see on your account is an administrative hold. The issuer can enforce these if you exceed your credit limit or regularly make late payments. Even if you can keep using your credit card after a single late repayment, multiple delinquent payments could still result in a hold.

Your issuer can report you to the credit bureaus for late payments and overspending on your account. This can harm your credit score, which can make it more difficult to get approval for future credit applications. A lower score can also result in less competitive borrowing terms, such as higher interest rates and lower credit limits.

How long does a credit administrative hold last?

If a hold is in place due to an exceeded credit limit, this will last until payment has been made to bring the account balance under the limit again. In the case of late payments, the hold will be in effect until the account holder has made several on-time payments to demonstrate that they are a responsible borrower. For regular late payments, the issuer could cancel your card.

To avoid the risk of facing an administrative hold, consider using banking alerts. These can notify you if you are close to your limit or you are due to make a repayment. Using an electronic funds transfer from your current account to your credit card can also ensure you always make payments on time and avoid any penalties.

Avoid surprise credit card holds

Understanding credit card holds can help you avoid surprises and manage your cash flow effectively. While authorization holds can be inconvenient, they're a standard security measure. However, contacting your card issuer is always best if you encounter an unexpected hold or have questions about a specific transaction.

If you're looking for a business credit card that offers transparency and control over your spending, Brex can be a valuable partner. Our business card provides clear authorization details upfront, minimizing surprises caused by holds. Additionally, with real-time spending insights and automated expense tracking features, Brex empowers you to manage your cash flow effectively and avoid situations that might trigger holds.

Stop worrying about credit card holds and focus on what matters most – growing your business. Sign up for a free Brex account today and experience the difference of a credit card designed for startups and high-growth companies.