When you use a credit card or bank card to pay a deposit for a rental car, hotel or apartment, it can eat up funds on a permanent or temporary basis. The amount and nature of the charge depends upon the terms of your agreement with the merchant, so you'll need to ask questions before you hand over your card to be swiped.
Card Holds
A hold is a pre-authorization on your card that a merchant uses to ensure that your card works. Some merchants simply charge $1 to the card, while others charge the full amount of the item you're purchasing or reserving. A hold will lower your available balance, limiting the money you can spend, but it does not reduce your posted or actual balance until the hold is finalized. If the merchant doesn't send the final purchase slip to the card company within a designated period of time – usually 72 hours – the hold will fall off of your account.
Charges in Excess of Purchase
Some businesses charge holds to your card that are in excess of the amount of your actual purchase. Particularly common among hotels and rental car agencies, the practice is designed to set aside a certain amount to cover additional expenses, such as dinner at the hotel's restaurant or gas charges for a rental car. You'll be charged this sum immediately, and it will lower your available balance, but you'll receive back the portion you did not spend after you check out or return your rental car.
Standard Deposit Charges
If you pay a deposit for an item you're renting with your credit or debit card, the deposit may go on your card as a purchase rather than a hold. The rental company will issue you a refund if you are entitled to get your deposit back at the end of the rental period. Many states require that landlords hold rental deposits in an escrow account, so if your landlord accepts payment via card, he could be violating the law.
Avoiding Deposit Charges
The easiest way to avoid excess deposit charges on a card is to pay them with cash or a check. You should also read every contract you sign with a rental agency. If you notice suspicious charges, contact your bank immediately. Most banks can't remove a hold until it is posted to your account, so you may have to wait a few days to formally dispute the charge.
