What is this charge on my credit card?

If you’ve been reviewing your credit card statements online, you might have occasionally noticed a random $1 charge — often noted as ‘pending’ — among your list of purchases.

Some scammers and fraudsters might do a trial run on victims’ stolen credit cards, charging $1 to $5 to see whether anyone notices before they run up larger charges. But often, a small charge is legit — at least temporarily.

Where do those small charges come from?

If you look at your list of pending transactions, you’ll probably discover that a random charge bumps right up against a charge from a petrol station, hotel, rental car or rideshare company like Uber or Ola. That’s because the small charge is actually a ‘temporary pre-authorisation hold’ from your credit card company. Basically, this gives the merchant the green light to charge your card for the full amount when the final purchase is made. By pre-authorising your card for a small amount like $1, the card company doesn’t have to place a larger hold against your account.

The charge disappears when the final amount you’ve spent with that merchant is no longer pending processing. The pre-authorisation is lifted, and that random charge doesn’t show up on your final statement.

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Why do I only see it with certain purchases?

Some kinds of merchants require preauthorisation, while others don’t. Certain retailers — typically Amazon, as well as petrol stations, hotels and rent-a-car companies — don’t yet know the final cost of your purchase when they accept your credit card.

For instance, when you swipe your card at a petrol pump, the station doesn’t know how much it’ll actually take to fill your tank. So, the merchant pre-authorises your card. That way, they’ll be pretty sure that you won’t charge more than your credit limit will allow.

» MORE: How to request a chargeback on a credit card

When should I worry about a $1 charge?

The $1 charged to your card when you rent a car or stay at a hotel should automatically drop off of your account when your final purchase shows up on your statement. In fact, once the final charge is no longer pending, you shouldn’t see the $1 pending charge anymore.

But if you notice that the small charge doesn’t automatically disappear or you see multiple charges on your final credit card statement, it’s time to contact your bank and find out what’s going on.

The takeaway

Those funny little $1 charges that keep popping up on your credit card account are usually nothing to worry about. They should disappear before you’re required to make a payment. Just be sure not to ignore any unauthorised $1 costs that stick around. Those could indicate a problem.

If you’re in the United States, read this article on the NerdWallet US site.

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