How to Avoid Headaches from Debit Card Holds

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Your debit card can cost you money if you don't get a handle on "holds."

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If you’re tight on your checking account balance, you may want to think twice about using your debit card for certain purchases.

After a debit card is swiped for payment, retailers like hotels, gas stations, and car rentals sometimes place a hold or a block on money from the account in order to secure the payment, protecting the money from any other use. This reduces the risk that the customer will be overdrawn and leave the merchant unpaid.

The hold can even be for more than the the amount of payment. For example, some hotels puts a hold on 120 percent of the cost of your room. If the cost is $100, that’s a $120 hold on your account. It holds the cost plus the additional amount to cover any incidentals expenses that may occur during the stay.

The actual charge is not put through until the merchant submits their batch of transactions and the banking system transfers the funds.

A big surprise can also happen at gas stations. If you use your debit card at a pump that doesn’t require a PIN, your bank may block out as much as $50 to $75. (Some stations may place only a $1 hold to make sure the account is still active.) That hold can last up to 72 hours. A card can be declined even if you have enough money for the gas – but not enough for the hold.

While account holds occur more often and cause more issues for customers with debit cards, merchants can also use them on credit cards to make sure a customer isn’t going over his credit limit.

Blocking probably isn’t a problem if you have enough money in your bank account. The problem comes if your balance is low or if multiple payments hit at the same time. The hold can lead to costly charges for insufficient funds if you still have overdraft protection on your checking account. If you do not have overdraft protection and you do not have sufficient funds, the card will probably be declined.

Here are some tips for dealing with account holds:

  1. When you rent a car, check into a hotel, or have to give your card in advance of service, ask if the merchant puts a hold on your account. Also ask how much the hold will be and how long the hold remains in place. If you’re going on a road trip with a rental car and multiple hotels, make sure you have enough money in your account for multiple account holds.
  2. Pay your bill with the same debit or credit card that you used at the beginning of the transaction. The hold may only last a day or two if you pay your bill with the same card you used when you checked in. If you pay the bill with a different card, check, or cash, your card issuer may hold the block for up to 15 days after you check out because they weren’t notified of the final payment and may not know that you paid another way.
  3. Use a credit card for hotels and car rentals. Some hotels even place signs at check-in recommending credit card payment to avoid the hold.
  4. If you use a debit card for payment, use your PIN number. PIN-based transactions are registered immediately.

Stacy Johnson

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