Were you ever told your debit card was declined or you are over your credit card limit when you knew you had the available funds in your bank or you had available credit on your card? Welcome to the world of “blocking.” What
exactly is blocking? Whenever you use your credit card or debit card to check into a hotel, rent a car or purchase gasoline, the company that issued the (credit or debit) card to you is notified to give an estimated total.
When the transaction is approved, the amount of your purchase is held or blocked. Now that is all good and dandy, because that is what we expect.
What we do not expect is for those companies to estimate that we might spend more. Who enjoys being charged for something that they might do, do you? Allow us to explain. Let’s just say you go on vacation and you check into a $70 a night hotel for five nights, you would expect $350 to be held or blocked, right? Hotels and rental car companies are notorious for adding onanticipated charges for incidentals such as food, beverages or gasoline.
These incidentals vary greatly from merchant to merchant. Gas stations are known to routinely block an extra $50-$75. It may take them a day or two to release the block. We’re sure you would agree that the price of gasoline is high enough without adding the expense of blocking.
Suppose you are college student and you have to purchase a few books for class and your tank is on “E”. You have $50 in your checking account. You figure you are good to go, so you head to the gas station to purchase $15 in gas. You are not worried because one book costs $15 and the other book costs $20. Of course you or I would never live this close to the edge, but we all have a very good idea of what life is like on a college campus. Off to the campus book store you go; you are dumbfounded when you realize your purchase does not go through. Your purchase did not go through because the gas station blocked an extra $5 on your card.
What if that same student used their debit card to purchase the gas and then decided to write a check for the two books. Now they are looking at two returned check fees totaling approximately $40 from their bank. And do not forget the fees that the bookstore will charge.
Blocking is used to make sure consumers do not exceed their credit limit or overdraw their bank accounts before checking out of hotels or returning rental cars. Merchants are nervous about not getting paid. More and more restaurants are using the blocking technique especially when they anticipate sizable bills from large parties.
How can you know when blocking will occur? A good rule of thumb is if you receive a service before your payment is due or collected. We can avoid the aggravation of blocking by simply asking the merchant if they use blocking and if so, how much will be blocked. Of course if you are nowhere near your credit limit or you do not have a low balance in your checking account,blocking obviously will not be a problem for you. Make sure to ask what is the time limit on the block.
Keep in mind with debit cards, when a block remains on an account for an extended period of time, it could lead to insufficient fund fees if you’ve written checks. Avoid more aggravation by paying your hotel bill, rental car bill or other ‘blocked’ bills with the same credit/debit card that you used to make your reservation. Better yet, consider opening another account with a debit card attached to it just for traveling and vacations. It is always a good idea to keep your bill paying funds in a separate account.
If you pay with different credit/debit card, by cash or by check, remind the merchant that you are using another form of payment and ask them to promptly remove the block. They are obligated to do so. You can also consider applying for overdraft protection at your bank. I only recommend doing this if the entire balance will be paid the following month. Your bank can answer any questions you may have on overdraft protection.
Most banks to a poor job of informing their account holders that they may bounce transactions due to overdrafts created by blocks. We suspect they are not forthcoming because return check fees and return debit fees add to their revenue. What gas station do you know that informs customers of their blocking policies? You pull up to gas up your Toyota and the amount they block, you would think you pulled up in a RV or a Tractor Trailer. Go figure!
To schedule a seminar or workshop for your organization please call 315-446-3294. Be sure to tune in to James and Barbara Peterson on WSIV 1540 AM. Their radio program ‘Improving Your Credit Worthiness’ airs on the 1st & 3rd Wednesday of each month from 2 – 2:30pm and also on the 2nd and 4th Thursday of each month from 4 – 4:30pm.