Debit Card Holds
Is your account
balance available to you?
How do debit
card holds affect you?
What is a debit card
hold?
When you use a debit card, the
store clerk usually contacts the financial
institution that issued your card to get an
authorization. When the approval is given, the
balance in your checking account is reduced or
"blocked" by the amount of the purchase. This is
known as a pre-authorization hold. The merchant
determines the amount of the hold. Your financial
institution establishes the length of time the hold
remains in place. Typically the hold stays on your
account until the funds are transferred to the
merchant from your financial institution, often 3-4
days. If you look at your account online it may show
as a pending transaction. Since transactions done
with your PIN (personal identification number) are
processed on the same day, they do not require a
hold.
How can a debit card hold
create problems?
In a few situations, the
dollar amount of the transaction is unknown when an
approval is given. This may happen when you check
into a hotel room, rent a car*, pay for gas at the
pump or use your debit card to pay for your meal at
a restaurant. In each of these transactions, the
merchant may get an approval for a higher
(estimated) amount– allowing for a tip, room
service, additional or higher purchase amounts.
Let’s say you have $60 in your
account when you use your debit card to pay for gas
at the pump. Since the purchase amount is unknown
when you insert your card, the merchant requests an
authorization for $50. The authorization causes a
hold to be placed on your account for $50 and your
available balance is reduced to $10. If you only
purchased $20 in gas you may believe you have $40
available in your account. Unless you understand how
a hold affects your account, your debit card could
be declined in future transactions. This can be
embarrassing and inconvenient. It could also be
costly. If checks or other transactions are
processed before the hold is released you may
overdraw your account and incur overdraft fees.
How can you avoid these
problems?
When you use your debit card
in a situation where the merchant may estimate the
charge (hotels, car rental*, paying for gas at the
pump, restaurants), the following tips may help you
avoid some frustration:
- When a business asks for
your card in advance of service - ask if the
company will request a pre-authorization hold,
the amount of the hold, and how the amount is
determined. Be sure the hold won’t exceed your
account balance.
- Pay the charges with the
same card you used at the beginning of the
transaction. Ask the clerk when the hold will be
removed.
- Prior to making a
purchase that will involve a payment with a
different card, by cash, or by check, inform the
clerk of the different form of payment and
inquire about their policy on reversing holds.
- Ask your financial
institution if they offer an overdraft line of
credit or another product that will cover
overdrafts. Learn how it would work and how much
it costs. Look for a plan that automatically
covers the overdraft and does not involve a
separate decision by the financial institution
as to whether or not to pay the overdraft each
time. There may be a fee or interest charged on
this plan. However, the cost is usually less
than an overdraft charge and the item would be
paid.
- Use your PIN when paying
for gas at the pump or pay inside.
- Use your PIN (if allowed)
or consider using another method of payment
(cash, check or credit card).
- In some cases such as
hotels, car rentals, you are better off using
your credit card.
1st Valley Credit Union
offers over draft line of credit and low interest
rate credit cards. For more information, call
us at (909) 889-0838 or stop by the branch.
