Authorization hold

So you think you've been overcharged... you just got home, looked at your account online, and that that darn restaurant or gas station or rental company has "taken money" from your account that is over and above what the bill was, even including tip! Screw 'em... time to fire up the trust Davis Wiki and chew them out about it...

Wait a second... you might want to learn a bit about how banking works first...

You see, there are different kinds of charges to accounts, and usually your online banking service doesn't show you the difference between a normal charge (the kind that actually takes money out), and an authorization hold, which (and this is the really important part) does not actually take money out of your account. Yes, it is showing up on your bank statement right now, and yes, they did do a transaction in excess... but that is because they didn't know how much to charge you. The "extra" charge will disappear in a day or two. Really. That's how it is supposed to work.

Why do they do this? Well, it's pretty simple: you just sat down at a restaurant, ate a nice $40 meal, and the waiter hands you the bill. You hand them your credit card, and they whisk it away. When they run your card, you haven't yet added a tip. They run it, the transaction adds a small excess 'floating' amount, and they return your card and the bill. You then write in your tip, and sometime in the next day they do their paperwork and tell the credit card company the exact amount. That's why you don't have two charges on your account every time you tip somebody at a restaurant.

Even more obvious is why gas stations do this: When you swipe your card at a pump, it is authorized. At the time, they have no idea how much gas you are getting... are you putting a couple gallons into a scooter, or filling a recreation vehicle up with $250 worth of gas? They toss an authorization hold on there, and you pump the gas. It's usually not noticed in this case because the pump is fairly regularly updating the amounts, but you can catch it if you check your account right after pumping gas. In this case, since they don't have any idea of the amount, they often show up as an undercharge.

Rental places will sometimes put a hefty hold on there, reserving the right to charge you for expected room service (yeah, statistically, you're likely to use it) or repair or replacement of an item or room. Hotels, car rentals and other places usually do this. You also see extra dollar charges sometimes appear to verify accounts.

The cool thing is that the charge automatically goes away if the merchant¹ doesn't file within a certain time period. It also often (depending on your card) doesn't affect your actual available balance. That means you can have $100 available, go to two restaurants, have $45 meals at both and they "charge" you $55 each, but you won't have gone over $100 if you tipped less than $5 each time. Oh, you're going to the fourth level of hell when you die² for skimping on the tip, but your account was never overdrawn. Like most things involving finance and banking, it depends on your details of your account: "debit/charge" cards may well get overdrawn, but "real" credit cards won't. By the way, ever wonder why rental places sometimes insist on a "real credit card"?

Authorization holds exist because a merchant can not check to see how much money you have available. This would be a blatant violation of your privacy, and could be used by unscrupulous individuals to steal from you. An authorization hold simply asks the credit card company if you have X amount available, and to hold that money for a short period of time.

In short, before writing a scathing review about how you were overcharged, you might want to wait 48 hours and see if that "overcharge" makes like a baker meeting a Boojum and softly and suddenly vanishes away.

• Wiki Answer's "Why would a restaurant put a temporary charge on your credit card?
  

• Authorization Hold on Wikipedia