Hotel pre-authorisation charges on your credit card: What they're for and why we're stuck with them

You've just rocked up to the check-in desk at your hotel and now comes a sour note. You're being asked to hand over your credit card so the hotel can take a deposit of $100, a pre-authorisation in hotel-speak. That's $100 for every night you're in the hotel. But you've already paid for your room, the hotel has your credit card details to cover any extras, what's the problem?

Correct, but the hotel wants to make sure there's enough in your account to cover any amount you might charge to your room by way of food and beverage, laundry, spa treatments and that late night raid on the mini-bar, should you be so foolish. If you walk out at the end of your stay without settling those charges, it becomes more difficult for the hotel to claw back what it's owed than if the hotel already has a lock on some of your funds.

According to Rodger Powell, Managing Director of Tourism and Hospitality Services AustralAsia, "Hotel theft is common, people still walk out without paying their bill, there's quite a lot of fraud. I just phoned three of the hotels I work with and all three had all found someone using a stolen credit card, caught when the pre-authorisation was denied. That's just in the last month. In one case the hotel was able to alert the police while the perpetrator was still in the hotel and the police made an arrest."

Another example - suppose you're a walk-in, a guest that shows up at the check-in desk without a reservation and books a room using a credit card. Since the guest is not charged until they check out, the hotel has no way of knowing whether the card is legitimate, but a pre-authorisation will confirm that straight away.

Note that the pre-authorisation is not a charge. Rather it's a block against your credit or debit card. A pre-authorisation of $500 means your spending limit is reduced by $500. That's why it's important to use a credit card rather than a debit card or a travel money card for the pre-authorisation, since it's only your credit limit that is reduced, rather than your access to cash on a debit card.

Not all hotels request a pre-authorisation, says Rodger Powell. "Of the hotels I just spoke to, none require a guest's credit card for a pre-authorisation except in a few circumstances. So for example if a business has already paid for accommodation for one of their employees then the hotel might require a pre-authorisation on check-in to cover incidentals, since the corporate account will only cover the cost of the accommodation. The alternative is to say to the guest 'Okay, you can check in but you can't charge anything back to your room', and that's not very convenient".

Also, "Industry sources tell me that the requirement for a pre-authorisation is more prevalent when the guest books a hotel room online through third parties." The hotel room is paid for but the hotel has no access to the guest's credit card and therefore the pre-authorisation is necessary since it guards against the possibility that the guest might do a runner.

Why are pre authorisations so high?

Another issue that frequently annoys guests is the size of the pre-authorisation. It's not uncommon to find yourself facing a demand of $100-200 for every night of your stay. If you're in a fancy resort or a Paris hotel frequented by rich folks, your pre-authorisation can be several hundred dollars per night. According to Rodger Powell, the reason is the hotel wants to make sure the pre-authorisations amount is greater than the guest's charges, even if they let their hair down.