People now tend to use debit cards instead of credit cards to save money on transaction fees. However, if you are traveling or planning to travel and you are making hotel, airline, or rental car reservations, use a credit card for reservations. DO NOT use your debit card except when you actually pay for purchases.

I had been staying in an extended stay hotel for the last month. I shop at local grocery stores just like the rest of the citizenry in town. I stood in front of a clerk checking out my purchases, when I got a big surprise. She handed me a slip that the store Point of Sale system had just generated: It said, Transaction denied; insufficient funds available in your account. But, but – we just deposited a thousand dollars that cleared and was available yesterday. I'm sorry sir, was the answer. I had to leave my items in my cart and left the store embarrassed.

Being of suspicious nature, I lost no time getting back to the hotel where I discovered that the debit card I used to make my latest reservation had put a hold on all of my funds in that account, and put me another $400 in the hole. The funds are still in the account, but not accessible. This is contrary to what some Internet articles would have you believe that an authorization removes funds from your account. You just can't write checks against the funds, the bank can't clear any checks, and you can't use a debit card to access the funds.

This is the way the authorization works: The hotel reservation software system added $50 to my nightly charge for the first night, added a 5% fee of the nightly charge plus the $50 plus the tax. For the second night the system performed the same calculation but added the 5% to the accumulated amount. The system repeated the calculation for each night in my reservation expanding the authorization until it was three or four times the actual charge. What should have been a total charge of $1000 turned out to be an authorization for over $3600. Now what?!!

Obviously, the scenario creates a serious problem for you if you have written checks on the funds in your account; you not only get fees for bounced checks, but late fees from the creditor, possible increases in your interest rate from your creditor for missing a payment or making a late payment, and losing points on your credit score. If you get into this situation, you must lose no time in working with the hotel manager to fax a statement to your bank to release the funds the hotel caused to be placed on hold. The release may take effect in several hours or it may take several days. In my case, I advised the bank what had happened and was able to get the release sooner.

My recommendation based on my experience: Use a credit card to make the reservation, and pay with the debit card.