We had a great weekend at my property. We’re a resort destination, and so you can probably imagine that Memorial Weekend is a big one for us. Saturday was a bit of a let down, we stayed busy, but there was rain in our area so it put a tamper on the experience. Sunday though was the perfect storm of awesomeness! The weather was perfect, we had a therapist for every treatment room and we booked the spa as full as it could get! We pulled down what we hope will be record-setting revenue, and there was $0 in discounts or comps given out, in both the Hotel and the Spa. That’s really amazing, overall the day ran very smooth, and it means what few speed bumps we did encounter didn’t affect guest service to any large extent. I’m super proud of my staff, both those that worked it, and those that didn’t but played an instrumental role in the reservations process that helped make the day go so perfectly. The other departments of the property (spa attendants, spa providers, housekeeping, and maintenance) were all on it too!

So, I feel like it’s time for some “Behind the Scenes Hotel Information” about Credit Card Authorizations. People who travel a lot aren’t caught so off guard by this, especially if they’re usually on a corporate credit card. Hotels among other businesses take an authorization on your credit or debit card. Hotels will do it at check-in time at the hotel. This is for some predetermined amount that generally at the very least covers your room & tax for the length of your stay, but generally there’s something else on top to guarantee any incidental charges you might have (spa services, retail items, in room movies, food & beverage anything). My hotel only does room & tax for the stay plus $100/night which is really a very small amount. I’ve worked at a resort that charge $300/night on top of their room & tax. Rental Car agencies do something similar depending on your package. At a restaurant, when they take away your card, they authorize for your bill plus about 15%-20% so that when they bring it back to get your signature, any amount you’re likely to tip will already be authorized. This protects the business from the customer walking away and the card declining after they’ve left. The merchant is basically asking the bank if you’re approved for a certain dollar value. The bank gives them an approval code, which is a promise from the bank to cover any single charge up to that maximum value. This process was originally designed for credit cards only, and in my opinion the bank industry has failed to adapt it well to the use of debit cards. The way they do it works great for banks, but it’s horrible for merchants and customers.

Here’s where it gets tricky, debit cards don’t work the same as credit cards. It boils down to this very simple principle, credit cards represent a hypothetical sum of money which some institution has agreed to loan you should you need it. Debit cards, because they go to your checking account, are tied directly to cold hard (well cold electronic) cash that you actually own. So the banks treat these two similar looking pieces of plastic in very different ways. I really like this article from Yahoo: Debit or Credit: Which Card to Use? Here’s what you need to know when you’re traveling. When you get to the Hotel check-in desk, they’re likely to ask you for a credit card at that point. If they don’t tell you, ask them how much they’re authorizing your card for (we believe in transparency and write it on our check-in slips for the guest). It should be a pretty automatic answer. If you’re using an actual credit card you just want to make sure this amount won’t max out your card at that time, because anything released from the authorization will go back onto your card nearly instantly and you’ll never even notice the authorization from the final charge unless the value hits your credit limit to begin with.

Debit cards are more tricky. Since debit cards are tied to “real money” not just money that someone says you can have if you need it, the banks are a lot more cautious with it. So when a hotel, or gas station, or restaurant, or rental car agency authorizes your card, there’s 2 things you have to worry about. The first is the same as a credit card, is there enough money on your daily limit or in your account to cover the amount being authorized for. I’ve run into this at gas stations before, I swipe my card at the pump and it declines because they’ve tried to authorize me for $80 or more dollars and I was needing a pay-day real bad. Go inside and it’ll approve for just the $40 I wanted to pump anyways. The second factor you have to consider, is even if you have enough in your account to cover the authorization, how soon are you going to need that money back when any unused amount is released? Because once the merchant releases it, the money can take 3 to 5 business days for your bank to put it back in your account. This especially happens when the merchant’s final sale is less than the amount authorized for. Say the hotel authorized for $100, and they put through a final charge of $75, your bank can legally take 3 to 5 business days to reflect the release of that additional $25. Sometimes this process can be cut down to 24 hours if you call your bank and ask for it to be released, it depends on your history with them. Another way to speed up this process, that I’ve found through years of experience, is the amount gets released a lot quicker if the entire preauthorized amount is released not just a portion, once again you’re looking at around 24 hours depending on the speed of your bank (instantaneously is rare). Here’s the catch to this one though, the merchant has to call their merchant service provider, and manually release the amount with them. You’re money is still going to be tied up for a time, but these are the two quickest ways of getting them released. Either one will involve someone making a phone call usually.

So here’s the advice I give to my guests, friends and family. If you’re traveling use your credit card for any preauthorization purpose that you can. For fraud and theft reasons use a credit card whenever you can for restaurants too (in school we talked about restaurants being one of the #1 industries for credit card thieves). Heck, if you can afford to do it, leave your debit card at home when traveling, your theft and fraud protection is much higher on almost any credit card then on your debit card if it’s lost or stolen. If you’re using a debit card, be cautious and be aware, just be educated about how it’ll effect your money.  If you want to pay with a debit card at check-out, that’s fine, use a credit card to check-in and preauthorize your stay. Let the Front Desk know that you plan to come back at check-out and pay with your debit card or cash or a check or whatever. That way the final charge doesn’t go on your credit card where it might collect interest, but you won’t tie up your “real money” in your checking account.

A lot of hotels are adapting to increase their transparency on this issue, since the banks have been very unresponsive, because it leads to upset and disgruntled guests very often. Some use a signed waiver form (which I’m pushing for us to use). We check for cards marked as debit and try to have a very frank conversation with them at check-in time. Some people really need to know before they even get to that point, however, and I just got my GM to approve my proposed redraft of our confirmation letter to include this policy. Not everyone will see it, but at least we’ll be able to say we tried. Not every hotel does this though, I often hear “I’ve never had any hotel do this before.” Well the truth is, they probably did it and never told you, and if you were using a credit card (especially a corporate card or a card with a large limit) then you probably never noticed the process. It’s just as the use of debit cards have become so incredibly common place that this has become a real issue for the industry and the guest. But most of the “big box” hotels (Fairmont, Marriott, Hilton, etc) have been doing it for at least the last decade, and even they are struggling to deal with guests that want to use a debit card for their stay. Any hotel that has more to offer then just the room (food, retail, spa, whatever) should be trying to take a preauthorization. It’s the safest thing for them and allows them to more securely offer extra services and amenities, and safer for the educated cardholder, it allows fraud to be more easily detected sometimes. Ultimately, I don’t like seeing this fairly common business practice ruin people’s relaxing vacations when it catches them unprepared. And I wish more consumer travel magazines would talk about it.


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  1. #1 by Kali.Amanda on May 30, 2011 - 7:49 PM

    This is very interesting and not something I knew (not all the details) and I certainly learned something new. I believe it is a very good move on your part to go for transparency with your guests. This is one of the things they will mention to others when they recommend it to friends.

  2. #2 by Shawn on May 30, 2011 - 9:26 PM

    What’s even more problematic is that no two banks have the same procedure fo releasing an auth. Some will do it with nothing more than phone call. Some require a video conference call and notarized forms filled in triplicate. Even worse are the banks (I’m looking at you BoA) that do not release autos for any reason. A new wrinkle is the prepaid debit card (popular with Expedia-class guests) or gift credit cards. Nothing like trying to explain authorizations to someone who is, shall we say, not travel savvy, when they are trying to pay for groceries after they get home. And the big hotel in Sonoma dropped the auth amount down to $100 a while back and it really has not done much to reduce the problems.

  3. #3 by Kali.Amanda on May 30, 2011 - 9:47 PM

    To be fair, BoA has its own problems. They probably don’t release payments to hang on to what little they have. That Bank is ready to crumble like a house of cards any day now!

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