What Is This 'Deposit'?
This surprise charge is not actually a charge, but a temporary authorization hold, often called a pre-authorization. When you provide your card, the merchant (like a hotel or car rental agency) asks your bank to set aside a specific amount of money. This money isn't
taken from your account, but it's frozen, reducing your available credit or the accessible funds in your debit account. The purpose is to ensure you have enough funds to cover not only the booking but also any potential extra costs.
Why Do Companies Need It?
Businesses use these holds as a form of insurance. For a hotel, the deposit covers potential incidentals like minibar purchases, restaurant charges, or damages to the room. For a car rental company, it acts as a security against returning the car with an empty fuel tank, incurring traffic fines, causing damage, or needing excessive cleaning. Essentially, it's a financial safety net for the company to protect its assets and ensure any extra costs incurred during your stay or rental period can be covered without issue.
The Shock Is in the Size
The main issue for consumers is that the hold amount can be significantly larger than the booking price itself. A hotel might hold the cost of one night's stay plus an additional percentage for incidentals. Car rental companies often place holds ranging from $200 to over $500, with luxury vehicles commanding deposits well into the thousands. This can come as a major shock, especially for travellers on a tight budget who were counting on having that credit available for meals, activities, and other holiday spending.
The Debit Card Dilemma
Using a debit card for a temporary hold is particularly risky. While a credit card hold simply reduces your available credit, a debit card hold freezes actual cash in your bank account. This means those funds are inaccessible until the hold is released. If the hold is large or slow to be removed, it could cause other payments, like bills, to bounce. Some rental companies even charge a higher deposit for customers using debit cards. Whenever possible, it is always safer to use a credit card for these types of transactions.
How Long Until You Get It Back?
The release of an authorization hold is not always instant. While it should be lifted shortly after you check out or return the vehicle, the process involves the merchant, the card network, and your bank. It can take anywhere from a few business days to a week for the funds to become available again. In some cases, particularly with certain hotels or car rentals, holds can linger for up to 30 days. This delay can significantly impact your purchasing power, especially on a long trip.
How to Protect Yourself
The best defense is preparation. Before you finalize any booking, read the terms and conditions carefully, paying close attention to the deposit policy. If it's not clear, call the hotel or rental agency directly to ask about the exact amount and their hold procedures. Always plan to use a credit card with a sufficient credit limit to absorb the hold without impacting your travel budget. At checkout or return, ask for a receipt confirming the final charge and that the temporary hold has been released. If the hold doesn't disappear from your pending transactions within a week, contact both the merchant and your card issuer to resolve the issue.
