What is a Debit Card Hold?
A debit card hold is a freeze on funds associated with a debit card until a transaction successfully clears or “settles,” in banking terminology. Holds are used to ensure that customers have enough money to cover transactions. Banks have individual policies on how long funds can be held in this way, and commonly holds are in place for less than 24 hours although they may last up to a week. Similar holds, also known as blocks or preauthorizations, can also be seen with credit cards.
Common situations where a debit card hold may be used include buying gas, renting a car, eating at a restaurant, and renting a hotel room. Merchants in these cases are allowed to hold funds over the amount of the estimated transaction to ensure that the customer has enough money to cover the transaction in full. At a gas station, for example, a large hold may be placed on the chance that the customer is filling a big gas tank. At a restaurant, a preauthorization in the amount of the bill plus an estimated percentage for gratuity will be made.
Until the hold is dropped, the funds will not be available to the customer. This can create an overdraft fee for a customer who is not aware that funds are being held. The customer might assume that funds are available for another transaction, and if the customer has authorized overdrafts on that account, the transaction will go through and the customer will be charged. Holds can also create confusion, as people may check with the bank and find a pending transaction that they do not remember authorizing in an amount that does not sound familiar.
A debit card hold will show as a pending transaction. The bank may not have information about whether the transaction is a hold or not. When the merchant settles, which can take several days, the merchant sends the bank the actual amount of the transaction, the hold is lifted, and the real transaction goes through. Sometimes, people may encounter situations where two pending transactions show. One transaction is the real transaction in the expected amount, and the other is a debit card hold.
Holds can be alarming for consumers and people may believe that their transactions were processed improperly if they happen to check on their accounts while funds are being held. They can also become a nuisance for consumers who don't have substantial funds on deposit because the hold can push the account balance dangerously close to zero. When people are involved in transactions that may be associated with holds, they should ask the merchant if holds are used. If they are, it is appropriate to ask how much money will be held and for how long, so that people can plan around the debit card hold or make alternative plans for payment.
Whenever I check my PayPal debit card balance, I'll see two transactions for each purchase. The first will be a debit card hold for the exact amount of the purchase, then the second will be a deduction from my account. The time between the two transactions will only be a few seconds.
I have encountered situations with other bank debit cards where a large hold will be in place for at least a day. It's mostly happened whenever I go to certain restaurants and pay for a large ticket. The merchants might have a sign that warns people about a debit card hold, but not everyone does that. Using a debit card out of town seems to make the chances of a hold more likely.
A few years ago, I bought gas at a service station that was way out in the county. I didn't have much money left in my bank account, but I thought I had enough to pay for the gas and for a meal once I reached my destination. When I went to the cashier's stand at the restaurant to pay for my dinner, however, my debit card was declined. I had no idea why it didn't go through. Fortunately, the manager was sympathetic and let me write an IOU.
When I got to my hotel room, I checked my bank balance online and there was a $75 debit from that service station. I only bought $15 worth of gas. That's when I figured out it was a debit card hold. It stayed on my account for two days, and the bank said there was nothing anyone could do to speed up the process.
That's why I tell people to get their gas at familiar places in town if at all possible. Most of the gas stations in town don't place these kinds of holds on debit card purchases, especially if you provide a local zip code when prompted.
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