Using Hotel Credit Card Holds to Avoid Advance Deposits

Can You Book in and Stay at a Hotel while on Credit Card Hold?

Can You Book in and Stay at a Hotel while on Credit Card Hold

Understanding and Utilizing Hotel Credit Card Holds to Avoid Advance Deposits

What is a Hotel Credit Card Hold?

How Hotel Credit Card Holds Work

• Purpose: The hold ensures the hotel has security against unforeseen charges like room service, minibar usage, or damages, which aren’t known at check-in.
• Process: Upon check-in, the hotel authorizes a charge on your credit card, which temporarily reduces your available credit limit. This authorization is usually released after check-out once all charges are settled.
• Duration: Holds are generally removed within one to a few days post-checkout. However, they can occasionally linger longer, requiring guest intervention with their credit card issuer for removal.

Using Credit Card Holds to Book Without an Advance Deposit

Strategy for Booking:

1. No Advance Payment Required:
   • If a hotel requires a deposit or an advance payment, you might instead offer a credit card for a hold. This way, you secure your reservation without an immediate outlay of cash or a permanent charge on your card.
   • Example: If a room costs $100 per night for a 3-night stay, totaling $300, a hotel might ask for a $120 deposit (40% of total). Instead, you could agree to a $200 hold, ensuring no upfront payment while covering potential extras.
2. Flexibility in Payment:
   • At check-out, you can settle your actual bill with cash, another credit card, or other payment methods if you prefer not to use the card with the hold. Once settled, the hold should be released, freeing up your credit.
3. Credit Utilization Management:
   • If your credit limit is $5,000, and a hotel places a $200 hold, your available credit becomes $4,800. You must manage this to avoid declined transactions, especially if you’re close to your limit.

Length of Stay with a Credit Card Hold:

• No Specific Limit: There isn’t a set number of days you can stay while your card is on hold. The hold is primarily about securing payment for potential charges, not limiting the duration of your stay.
• Daily Holds for Extended Stays: For longer stays, some hotels might apply a new hold each day or every few days to ensure they have ongoing coverage for incidentals.
  • Example: For a week-long stay, a hotel might initially place a hold for three days ($300 if daily rate is $100) and then reassess or apply additional holds every few days, potentially up to $700 for the entire week, although this varies widely by hotel policy.
• Hold Duration Post-Checkout: Most holds are released within 1-3 days after checking out, but some can take up to 5 business days, or even longer in rare cases.
  • Scenario: If you check out on a Friday, you might not see the hold released until the following Tuesday, affecting your available credit until then.

• Cash Flow Management: By using holds instead of deposits, you maintain liquidity since no actual funds are removed until charges are confirmed.
• Security for Both Parties: The hotel has assurance for payment, while you avoid losing money if plans change, as holds are not actual charges unless converted.

• Credit Impact: If you have a $2,000 credit limit and a $200 hold is placed, your credit utilization increases by 10%. If your credit utilization is already high, this could negatively impact your credit score.
  • Calculation:
    • Before Hold: Credit Utilization = 20% (assuming $400 used)
    • After Hold: Credit Utilization = 30% ($400 used + $200 hold / $2,000 limit)
• Hold Release: If you check out on a Friday, and the hold typically drops within 3 days, you could see your credit limit restored by Monday. However, delays can occur, so monitoring your account is advisable.

Best Practices for Guests

• Know Your Card’s Limit: Ensure you have enough available credit to not only accommodate the hold but also for other potential uses during your trip.
• Communicate with Hotel: Ask about their hold policy at check-in to understand the potential impact on your finances, especially for extended stays.
• Check Post-Checkout: After leaving, verify the hold has been released. If not, contact your card issuer to expedite the process.
• Use Multiple Cards: If possible, use one card for the hold and another for actual expenses to manage financial commitments better.