Eli5 why do shops, hotels and so on reserve a larger amount than needed on credit cards.

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For example, I’m staying in a hotel, I pay for my room with MasterCard. The total comes to 250 dollar. I check my credit card statement 2 days later and there is 250 dollar off the account and an other 250 reserved.

In: 2

Incidentals

It’s used in case you try and ditch, especially if you caused damage. Think about it like a security deposit.

They typically run the amount to verify there is limit, then charge the actual amount and release the hold. They also sometimes overcharge/pre-charge as a deposit for incidentals/damage, ie. in case you consume stuff from the minibar or pay-per-view movies, use paid internet connection, smoke in a non-smoking room, steal a robe, etc.

Especially for hotels and rental cars and such they need to make sure you can pay for any damages or extra charges you may have. If you rent a hotel room, empty the minibar before leaving and then when they charge your credit card it gets declined the hotel will have to spend time and money going after you for the bill. They do not want to do this. So they reserve an additional amount on the credit card and when they have inspected the room and counted the bottles in the minibar and the towels in the bathroom they remove the reservation on your credit card.

Let’s say it costs $200 to spend a night in a room with a $500 TV set. They stand to lose much more than the $200 you might not pay, if you decide to be unreasonable.

Think of it like a security deposit. They put a hold for extra money on the card so that in the case they need to charge your card for damages, (1) they *know* that they can, and that you didn’t just use a prepaid card with just enough to pay for the room, but (2) By having that hold, they can still get their money even if you cancel the card.