Debit Card "Holds"

 

It has been the norm for years that, when you give your credit card for advance payment authorization by a hotel or rental car company, a “hold” is placed on your account to cover the anticipated charges.  The same is true now if you use the popular debit or check card, particularly for hotels, rental cars and even restaurants.  The bank places a hold on your account as a means of assuring payment to the merchant and making sure you don’t spend more than you have.  This standard precaution can be compared with requiring presentation of a driver’s license for check payment purchases. 

Where the practice has attracted the most attention lately is with motor fuel purchases.  As gas prices have bolted to record levels, American motorists are also conserving cash, if not fuel, by using debit cards at an unprecedented rate to pay for gasoline purchases.  According to an estimate by the National Association of Convenience Stores, nearly 80 percent of customers were paying with some form of “plastic” as of October 2005, and this has wrought certain hardships on some debit-card users.  With fuel prices increasing so dramatically, retailers are now holding $50 to $100 to cover the average tank of gas.

The merchant sets the amount of the hold, but the bank that issued the card is responsible for the length of time of the hold.  While the hold with the merchant generally lasts for not more than a day, some credit card companies allow up to three days for banks to clear transactions and remove the hold, which may affect your spending limit during the processing period.  If you do not allow for this, some checks could bounce even though the money is in the account to cover them.

How can you speed up the hold time and avoid having use of your card denied when you know you have a sufficient bank balance?  Use your personal identification number (PIN), rather than a signature-based transaction, with your debit card for greater security and an immediate release on the hold.  If you use your PIN and the display reads "Authorizing…" after you swipe your card, the normal money hold is being charged to your account.  In the case of a gas purchase, the hold should change to the actual amount after you finish filling your tank.  Pay inside for gas purchases if the pump does not have a PIN pad; or consider paying by credit card instead.

Also present your credit card up front for hotel stays or car rentals of more than one day.  When you pay your final bill, using a debit card is fine, because the exact amount should then be charged to your account.

It would be a good idea to ask your bank about its policy on the length of debit holds.  If a hold lasts longer than a few minutes for a PIN-based transaction or a few days for a signature transaction, ask why.  Make it a regular habit to monitor your online bank statements, and call the bank if you notice any problems associated with debit transactions.