| Originally posted on Reddit. See Thread |
There seems to be a general lack of understanding about the concepts of authorizations, holds, and incidentals. I admit that until I started working at a hotel I didn't know anything about these ideas either, as it was not a normal part of my everyday life.
Here I will explain what these things are, how they work, and why they exist.
For the sake of this post we will assume the following:
- "You" are a guest at "our" hotel.
- Your stay is worth $500, room and tax.
- During your stay you buy $30 of snacks from our snack shop and incur a $30 pet fee for having your korgi with you.
EDIT: In response to some comments from other redditors I have updated the section about credit card authorizations to reflect that banks will probably reduce available credit rather than silently approve an auth.
When you arrive at the hotel the first order of business - after tapping a kidney in the public restroom - is almost always to visit the front desk and check in. There you will find, ideally, a smiling and amiable front desk agent who will ask you for your driver's license and credit card.
The agent will insist that you show them your physical credit card, and put up a fight if you refuse. There are a few reasons for this:
- To make sure the card hasn't been confiscated or destroyed. Does the card still exist?
- To make sure the card belongs to you. You can't take a picture of someone else's card and show that to the agent. You also can't just buy a card on the dark net and plug that in on the hotel's website. It's gotta be in your wallet.
- To make sure your name is on the card, the same as on your state-issued photo ID. You can't pay with your ex-girlfriend's card.
- The bank cares about the above reasons, and if we don't verify that you have the card then they could screw us out of our money.
The agent will hand your card back to you and smile at you. They might comment on your sweater, or ask how old your kids are, or say something about how they're glad you survived the <insert weather event here>. While they're making this idle chitchat with you they are doing something critically important, which absolutely stands between you and your room keys.
While they're listening to you prattle on about your minivan the agent is doing the digital equivalent of taking your card to the bank and asking whether you actually have enough money to pay for your room, or whether you're some schmuck with a dead piece of plastic trying to score a free room for the night.
They're not just asking for the $500 room+tax amount, either. They're asking the bank a whole series of questions in one go:
- Is your credit card real? It looks real enough, but do the numbers actually work out to a real account?
- Do you have the $500 necessary to pay for the room?
- If you destroy our stuff, what are the chances that you'll actually be able to pay for the damages? Do you have, say, $100 extra lying around? This figure changes from hotel to hotel; some places it's 10%, some places it's $100 flat, some places it's $50 per night. It depends on the hotel. See the section below about incidental holds.
So we'll assume this hotel has a flat $100 incidental hold. This now-$600 question, called an "Authorization", is our guarantee that (A) you are able to pay for the room and (B) your bank is willing to fork over the funds to do so.
How do these actually work?
Credit Card Authorizations
Please note that check card and debit card authorizations work differently. Read this section, but then see the next one also.
We have decided that, in order to stay with us, you need to be worth at least $600 ($500 for the room and tax, plus $100 incidental hold). As mentioned before we ask the bank if you're worth this much.
Your bank looks at how much money you have in your account and decides to say either "yes" or "no". They might say "no" for any number of reasons; maybe you have no money or maybe they think it's weird that a man from Manhattan is suddenly trying to buy a hotel room in Nogales. Today we'll assume they said "yes".
Now your bank has committed to pay us up to $600 if we ask for it. They trust that, if we decide to charge that much, we have a good reason to do so. There is a whole procedure for going after a merchant (such as a hotel) that is suspected of making bogus charges, but for today we'll assume that our hotel is the honest kind.
Your bank will probably not make any noise about the hold; you might not be notified or harassed at all when we run your card. This is actually a feature of true credit cards (like AmEx Gold or some such program), to make life easier for you. If you were to check your statement there would be no transactions or anything, pending or otherwise, to suggest that you are doing business with us.
Probably all that will happen immediately is your available credit will drop by $600. This is because the bank has promised to use $600 of your credit to pay us if we ask for it. They haven't paid us yet; they're just making sure they don't promise the same $600 to anyone else.
The day you check out we send a final bill to your bank, which says you actually owe us $560 ($500 for room and tax, $30 for your snacks, $30 for your korgi). Within 3-5 days the bank posts a transaction, which you see, where you lose $560. The remaining $40 you keep and the bank's promise to us that you're good for that extra $40 just vanishes into thin air. Your available credit goes up $40 (so it's now down a net $560). This is the point at which we actually have your money.
Anything That Isn't a Credit Card
Check cards (your ATM card linked to your checking account) and debit cards work very differently. When the bank makes that promise that you're worth $600, they will actually post a "pending" transaction to your account. Suddenly your account will be missing $600 because your bank doesn't want you to spend all that money somewhere else after they just promised it would be available to us. We don't actually have the money yet, but your bank is planning for the worst-case scenario in which we ask for all of it.
When you check out we send the final bill of $560 to the bank and they kinda just hang out for a few days. After what usually amounts to 5-7 days they change the $600 transaction to a $560 transaction and their promise that we can take another $40 just goes away. This is the point at which we actually have your money. Until the 5-7 days are up we can't "give it back to you" or "undo it" because we literally do not have your money; only a promise that we can ask for it. Even if we tell the bank that we don't want the money at all (this is called "releasing the authorization") they'll wait 5-7 days before giving it back to you.
Debit cards, depending on the bank, sometimes immediately show authorizations as if they were completed charges. Rest assured that your charge isn't final yet, as the folks at the front desk will tell you, and that you haven't been overcharged yet. The numbers will "settle out" a few days after checkout. If you have doubts you can get a receipt from the front desk showing all actual charges made to your card.
Authorizations, In Summary
When you check in, we ask the bank if you're worth $X. They say you are, and prepare to pay us $X if we ask for it.
When you check out we tell the bank you ultimately owe us $Y.
A few days after you check out your bank decides that $Y is indeed the final amount and actually pays us. This is the moment when we have your money, and the numbers in your account exactly match the numbers we have in our system.
What is a Hold?
A "hold" is that promise from the bank that you're good for some amount of money. The "hold" is the promise itself and the "authorization" is the act of obtaining it. You could functionally consider these synonyms; some places use the words interchangeably.
Why an Incidental Hold?
An incidental is, in hotel lingo, anything that happens to your account that isn't room or tax. Among other things pet fees, snack shop charges, smoking fines, parking payments, and meal tickets all classify as incidentals. Many guests incur incidentals during their stays, so it isn't abnormal or something to be ashamed of. It is equally ordinary to have a whole stay in which there are no incidentals whatsoever.
When you check in we place an incidental hold on your credit card in addition to a hold for your room and tax. This is insurance for us that you haven't bankrupted yourself by buying the room, so if you destroy our stuff we can charge you for it with some measure of success.
In your case that hold was a guarantee that when you waltz past the desk with a Twix bar and say "put it on my room" we can do exactly that. Your pet fee also comes out of this hold, and at many properties if they know you'll have fees coming your way they will inflate the incidental hold accordingly. In such a case your hold would be $130 ( = $100 plus $30 anticipated pet fee) but would have been $100 without the korgi.
This is not us cheating you out of your money - because, as stated above, we don't actually have it. It's quite the opposite, in fact; we're getting assurances from your bank that you will not cheat us out of our property and completely get away with it.
It is very, very normal for us to get frustrated calls from guests who are angry about an extra $25 or $40 charged to their credit card (actually check card) half an hour after they check in, especially if they're prepaid guests (whose cards were authorized and charged for their room+tax months ago when they booked). This is where most people say "you overcharged me" or "I expect to be compensated for this screw-up". Glossing over the fact that there is signage posted in the lobby of every hotel on the planet announcing the whole concept of incidental holds, we explain that his was not actually a charge and is just a hold, standard procedure.
Consider Skevin.
Skevin is your classic d-bag clad in a Monster hat and a wife beater. He has a heroin-addled girlfriend at his side and two kids in the back seat. He has a warrant for his arrest in the next state over and he has a drinking problem.
Skevin comes into the hotel and asks to buy the $500 room and pay in cash. We don't actually know any of these details about Skevin (except the hat and wife-beater) so we say "no problem, we just need a credit card for an incidental hold". We get the bank to promise us that Skevin has at least $100 in his bank account which we can have if we need it.
That night Skevin gets very drunk, has a row with his girlfriend, and puts his fist through the $250 television that's in his room. Now he owes us $250 for the TV.
We know we will definitely get at least $100 from him, because the bank promised us that much. However we are also pretty confident, since we know he has $100, that we can get all $250 from him. We ask the bank to crank that $100 up to $250.
At this point the bank might say no; maybe he only had like $104 in his account. That's fine; it's a calculated risk we took when we set our incidental hold policy at $100. We'll take the $100 from Skevin and lose $150 on the TV. No big deal.
If the bank says yes, then that's good news for us. Skevin will be paying $250 for the TV and he's still on our do-not-rent list until the end of time.
Also consider Francois.
His legal name is Frank but he makes everyone call him Francois because he has a $300 watch on his wrist, drives a Mercedes, and works as an executive for a fortune-500 company. This guy is loaded and makes sure everyone knows it.
Frank is too good for our stupid rules. He's a chain-smoker and has decided that our no-smoking policy does not apply to him. Despite having signed our no-smoking policy written clearly on his registration documents he smokes like a chimney during his entire stay, and when the housekeepers tend to his room they discover that it smells thickly of Kools.
Fortunately we have a $100 promise from the bank that if Frank breaks our rules we'll get at least that amount. Just like Skevin and his TV, we get at least $100 and try for the remainder of whatever our smoking fee is.
Prepaids
I will eventually write a whole post about prepaids because there is much to know. For now I will say that, depending on the hotel and the website used to book, a prepay charge might be an actual, real charge or it might just be a hold that starts long before you arrive. In many cases the hotel isn't involved at all, such as with Expedia; in these cases you pay Expedia and not the hotel. It depends on the situation, but in all cases the front desk staff can help you understand what's going on.
In all prepay cases an additional hold for incidentals is placed when you check in - even though we already have a hold for your room+tax. This is why we frequently get "I already paid for the room, why do you need my credit card?" and "This room was already paid for, why is there a $100 charge on my credit card today?". It's just an incidental hold.
Conclusion
In the world of plastic payment there is a major difference between a hold and a charge. A hold is just a promise of availability, while a charge is a completed transaction. It can be difficult to distinguish between these in your bank statement, especially with debit cards, but you can be certain that the hotel and the bank are keeping very careful track of what's really going on.
There are shady hotels out there, but on the whole your desk agents are not trying to cheat you. We have nothing to gain (and a lot to lose, see [chargebacks](https://chargebacks911.com/chargebacks/)) by mis-charging you. In fact, your desk agents should be more than happy to explain your receipt to you, explain how authorizations work, and tell you (truthfully) that all the extra money in the hold will be returned to you within a few days.
Please note that it is still better to pay with plastic despite all of this "authorization" and "incidental" jargon. Cash transactions are much more cumbersome and can be limiting to you (you can't buy extra stuff if you want it, it's harder to extend your reservation, it's much harder to get a full or partial refund). Many hotels will not take cash at all, and those that do still require a card anyway for incidental holds which will be much higher than normal because you're paying in cash. If you somehow do find yourself at an unscrupulous establishment your bank cannot help you at all if you paid in cash.
The best bet is to pay with a true credit card (not your ATM checkcard or your debit card) because authorizations tend to be much less of a headache for you; often they're totally invisible and out of your way. Your protections with the bank are also much better with a credit card than with any other plastic.
All in all, if you have problems ask your desk agents or even Reddit for help.