Beware Debit Card Holds, Especially at the Gas Pump
Debit card holds are a common practice at restaurants and gas stations, and they can get you into trouble if you're not careful.
Debit card holds, also known as pre-authorizations or "blocking off", represent an aspect of commercial purchasing that many consumers are completely unaware of. But placing holds on debit purchases is a common practice, one you've probably been subject to more than once.
Usually this sort of pre-authorization isn't a big deal, but it can be costly and annoying if your bank account balance is low to begin with.
Laying Claim to Your Cash
The language used to describe this process can be a bit misleading. It's not the use of your card they're "holding" or "blocking off" -- it's a chunk of your money in the bank.
Here's what happens: when you decide to pay with a credit or debit card at the gas pump, the merchant has no idea how much you're planning to put into the tank. Mostly, you don't either, if you're planning to just fill up. Ditto for restaurants; who knows how much you'll tip?
So the merchant lays claim to a block of your money in excess of the amount they expect you to pay. Often this block is $50-75, though gas stations may start raising the limits if gas prices continue to rise. Ideally, once the transaction is complete, the merchant should release the hold, and everything's copacetic.
The Logic
It's perfectly reasonable for a merchant to want to insure that they receive payment in full when they have to authorize a purchase in advance, but needless to say, there's a lot of potential for mistakes and abuse in the system.
If you're using a PIN-based debit card, the hold should release as soon as your transaction is complete. Holds on signature-based debit cards should last no more than three days. Unfortunately it's not uncommon for holds to stay in the system for as long as a week.
Some credit/debit card issuers, such as Visa, set limits on how long a merchant can block off funds in your account; Visa's limit is three days. However, this practice is not yet universal.
Unexpected Outcomes
Here's the problem with holds, from a consumer perspective: if your account balance is low and you get hit for a $75 hold that you don't know about, and you keep spending, your finances could head into red-ink territory and a whole cascade of overcharges and fees could fall on your head.
The fees could add up to more than the original block. This may not be financially devastating, but it's annoying and painful to fix. If you want to avoid the problem, you may need to start paying cash at the pump or in restaurants -- or at least keep a close eye on the merchant's debit card holds policy.
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