Debit card holds freeze funds until a transaction is settled, ensuring customers have enough money to cover transactions. Holds can last up to a week and can create confusion and overdraft fees. Merchants commonly use holds when renting cars, buying gas, eating at restaurants, and renting hotel rooms. Customers should ask merchants how much money will be held and for how long.
A debit card hold is a freezing of funds associated with a debit card until a transaction is successfully settled or “settled” in banking terminology. Holds are used to ensure that customers have enough money to cover transactions. Banks have individual policies for how long funds can be held in this way, and holds are commonly held for less than 24 hours, though they can be as long as a week. Similar holds, also known as blocks or pre-authorizations, can also be viewed with credit cards.
Common situations in which 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 may hold funds on the estimated transaction amount to ensure that the customer has enough money to cover the entire transaction. In a service station, for example, a large warehouse can be placed in case the customer is filling a large tank of fuel. At a restaurant, a pre-authorization will be made for the amount of the bill plus an estimated tip percentage.
Until the hold is removed, the funds will not be available to the customer. This can create an overdraft fee for a customer who is unaware that funds are being held. The customer may assume that the 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 can check with the bank and find a pending transaction that they don’t remember authorizing in an amount that doesn’t sound familiar.
A debit card hold will show as a pending transaction. The bank may not have information on whether or not the transaction is put on hold. When the merchant settles, which can take several days, the merchant sends the actual transaction amount to the bank, the hold is lifted, and the actual transaction is completed. Sometimes people may encounter situations where two pending transactions are displayed. One transaction is the actual transaction in the expected amount, and the other is a debit card hold.
Holds can be alarming to consumers, and individuals may believe their transactions were improperly processed if they monitor their accounts while the funds are on hold. 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 low. When people are involved in transactions that may be associated with holds, they should ask the merchant if holds are used. If so, it is appropriate to ask how much money will be held and for how long, so that people can plan to hold the debit card or make alternative payment plans.
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