Hotel Technology

Why do hotels need guests' credit cards for an authorization or hold?

3 Minutes

Kajal Makhija

Why do hotels need guests' credit cards for an authorization or hold?

Kajal Makhija
Published on

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Whenever a guest arrives at a hotel, most of the time the front desk asks for the guest's credit card and photo ID, regardless of whether the guest has paid for the room or not. The most commonly used sentences by the front desk are that they need the card details just for authorization/hold/incidentals. Many times, a guest doesn't understand what these terms mean. 

In this blog, let's break down the meaning of these terminologies and understand why hotels need guests' credit card details. Let's look at what is credit card authorization, holds, and incidentals? 

Assume a scenario where a guest has made a reservation with a hotel for one night, and the charge for one night is 500$ + taxes. 

When the front desk asks the guest for their credit card details, they are trying to communicate with the guest's credit card issuer. Now the question arises: why do hotels need to communicate with the guest's credit card issuer? Here are some reasons why they need to do this? 

  • Hotels need to make sure that the credit card is real and belongs to the guests sharing the details. 
  • Hotels need to make sure that the guest has enough money to pay the total amount of (500$+taxs) 
  • Hotels want to ensure that in any scenario, if the guest damages some hotel property, they have an additional 100$ to offset the cost of the damage or the incidental? 

In this process, the hotel has asked the credit card issuer to authorize 600$. This tells the hotel that the guest can pay 500$ for their stay. This means that 600$ from the guest's credit card will go down from the available balance because the hotel has held it, but the guest has not yet been charged. 

Now let's look at this scenario: the guest arrives at the hotel and checks into their room, and during his stay at the hotel, he breaks a lamp in the hotel room. The lamp cost 20$, and he also has a soda from the mini-fridge, which is 30$. 

Now, when the guest checks out of the hotel, he owes the hotel a total of 550$. The amount of 600$ was kept on hold by the hotel they charged the guest 550$ and the rest 50$ are transferred back to the guests account. 

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What is credit card authorization? 

Credit card authorization means that the hotel is making sure that the guest card issuer of the card account has sufficient balance and the guest is open to paying it if required. 

What is hold and is it different from authorization? 

Hold means the hotel is asking the card issuer or bank to keep aside the sum of 600$ from the guest's account, which he can not use. 

A hold is a promise that the fund is available, while authorization is the act of obtaining the transaction. 

What is Incidental hold? 

An incidental hold is the additional cost to the guest that is beyond the cost of the room+tax. Considering the above example where the guest broke a lamp and had a soda from the mini-fridge, this is an additional cost, which is been then deducted from the additional 100$ that was authorized and on hold.

Because the hotel has already authorized to charge up to $600, they don't need to run the guests' card again to charge for the lamp and the soda.

Now if the incidental cost exceeds 100$ that was set aside there is no guarantee that the hotel will receive that additional money from the card issuer because there are chances that the card doesn't hold any more money. In that case, hotel will have to bear the loss. 

Benefit of Credit Card Authorization/Hold?

Holding a credit card while staying at a hotel offers several benefits to both the guest and the establishment. For guests, it provides a convenient and secure way to handle expenses without the need for carrying large amounts of cash or pulling out card at multiple touchpoints. Credit card holds ensure a smooth check-in process, allowing guests to enjoy their stay without worrying about immediate payment for room charges or incidental expenses like dining or spa services. Additionally, it acts as a form of security, protecting guests from potential theft or loss. For hotels, credit card holds minimize the risk of unpaid bills and help in streamlining their accounting processes. It also enables hotels to offer additional services to guests, creating a more enjoyable and hassle-free experience. Overall, credit card holds promote financial security, convenience, and efficiency for both guests and hotel businesses.

How can Quoality help hotels with credit card authorization? 

Quoality has launched its credit card authorization feature for hotels where hotels can share a secured payment link with their guest on their preferred communication channel. This makes it easy for hoteliers to track how many guests have done their card authorization and how many are pending. 

It allows hoteliers to take easy follow-ups from the guests for card authorization and send time reminders. 

To try this feature, you only need to do a free signup, and we will assist you in setting up this feature for your hotel. 

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