Uncertain Price Charges
- When a customer pays for certain things, the price is fixed. However, in some cases, a credit card approval is sought for something that does not yet have a final price. The most common example of this is when renting something such as a car or hotel room. Because the customer could theoretically keep the car an extra day, or use the mini-bar, no one knows what the final charge will be on the credit card.
Credit Card Approval
When a merchant accepts a credit card, they can request an approval from the credit card company for that purchase. If the credit card issuer approves the purchase, then the merchant is assured payment regardless of any subsequent action by the cardholder. So, if the credit card issuer approves a $500 stereo purchase, the merchant can rest assured that they will receive $500 from the credit card company.
Credit Card Hold
In some cases, a merchant will want to get an approval from the credit card issuer for an unknown amount, even if the transaction has not been completed yet. For example, if someone is staying in a hotel room, the hotel wants a guarantee that it will get paid for the room but, because the customer is still staying at the hotel, there is no final bill. In this case, the hotel will process an approval for an estimated amount. The credit card issuer will approve or deny this amount. Because the credit card company has guaranteed that the hotelier will get that amount of money, they do not want the credit card holder to spend that part of their credit limit again. So, the credit card company will place a "hold" on that amount of money. If the transaction does not occur (the guest paid with a different credit card at check out), the hold will be released after a certain period of time. Once the hold has been released, the credit card holder is able to use that portion of their credit limit again.
Fixed or Arbitrary Holds
Sometimes, a merchant will have not any idea how much a customer will end up spending. This is frequently the case at restaurants or bars. So, the establishment will request a pre-approval for a certain amount. This can cause issues if the establishment requests too high of hold. For example, if someone who has $500 left before he reaches his credit limit uses his credit card to establish a tab for the evening and charges $100. If the establishment placed a $200 hold to make sure they were covered, and the customer later tries to buy something for $350, their card will be declined until the hold is removed. ($500 left - $200 hold = $300 allowable purchases)
Hold Released
Holds are released automatically after a certain period of time. How long varies from credit card to credit card and for various types of purchases. As a result, a hold can be for 24 hours, or for 3 business days.
Read more: How Does a Hold on Credit Cards Work? | eHow.com http://www.ehow.com/how-does4564360hold-credit-cards-work.html#ixzz2BQ4EBYg4