In the regular course of using your credit and debit cards, you may find merchants telling you that the card is “blocked,” "rejected," or has been refused. Here’s what’s going on.
Have you had a credit or debit card purchase rejected when you were sure you were well under the credit limit? Here’s what may have happened. People often use a credit or debit card to buy gas at a “pay first” station, rent a car, or pay for a hotel stay after giving the card to the hotel at check-in as security that they will pay the bill. All of these transactions have one thing in common: The customer is offering the card as payment for a transaction, but because the business doesn’t yet know the total that will be billed, the business puts a “hold” on your debit or credit card for the estimated amount you will spend. Usually the amount withheld is not that large and is held only for a short time. Unfortunately, some businesses have been known to hold much more than the estimated amount you’ll spend and keep the hold in place for up to 45 days.
Whenever you pay with a credit or debit card at a gas station, hotel, rental car agency, or anywhere else you provide your card before the amount of the bill is certain, you can protect yourself in one of two ways:
It's happened to all of us. You present your credit card to a merchant or restaurant waiter only to have it returned as rejected. This can happen even if you pay your bills on time, all the time. So why exactly is your credit card rejected?
When a merchant swipes your card, it’s contacting a credit card guarantee company that has a record of your credit status. The guarantee company checks for:
Your overall credit limit. If you’ve exceeded your line of credit, the guarantee company probably will tell the merchant to reject your card.
Your daily limit. Many credit card companies do not let cardholders use their card more than a certain number of times a day or spend more than a certain amount per day. This is meant to protect against the use of stolen cards. If you’ve exceeded the daily limit, the merchant will be told to reject the card.
The amount of the particular purchase. Merchants must check with the guarantee company for approval on purchases larger than a certain dollar amount (called a “floor limit”), which varies among guarantee companies and merchants.
Whether you are late on a payment. If you often pay late, the guarantee company may tell the merchant to reject your card.
Whether the card should be taken away from you. If the card was reported stolen or if you are excessively delinquent in your payments, the guarantee company will tell the merchant to keep it. Some merchants receive rewards for turning in revoked cards. Most merchants, however, refuse to confiscate cards and instead simply tell you your card was not accepted.
Excerpted from Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Margaret Reiter and Robin Leonard (Nolo).