from: http://www.azcentral.com/arizonarepublic/business/articles/0420Wiles20.html

Debit-card holds come as a rude surprise

Russ Wiles
Republic columnist
Apr. 20, 2003 12:00 AM

Lori Kissich got quite a surprise recently when she tried to make a store purchase using her debit card. The transaction failed to clear, even though the Glendale woman knew she had enough cash in her bank account to cover the purchase.

"I had been using the card for five or six months, and this was the first time I noticed that happening," she said. "The whole thing was bizarre."

It turned out Kissich had stumbled across one of the lesser-known caveats of consumer banking. Banks, credit unions and other debit-card issuers can place holds on a customer's funds to cover the estimated cost of certain transactions when the final amount isn't known, such as when one swipes a debit card at a gas pump before filling up. Often the held amount is in the $30 to $50 range.

"This process known as a 'hold' safeguards both cardholders and merchants," Visa USA, which operates a payment system for debit cards, said in a statement.

Holds ensure that cardholders don't spend more than they have in an account, while ensuring that merchants receive payment.

"Similar to how check deposits can't be immediately withdrawn, (debit) account deductions can't immediately be cleared when the final amount isn't known," Visa said.

Holds typically are lifted within 24 hours, as transactions are processed, but banking institutions can keep them in place up to 72 hours.

Hold policies, which vary by banking institution, are worth heeding, especially as debit-card use continues to expand.

Visa recently said that the number of debit-card transactions topped credit-card activity for the first time, though the dollar value of credit purchases remains larger.

Among their benefits, debit cards are more widely accepted than checks, with no identification required (although personal identification numbers, or PINs, often are needed). And unlike credit cards, debit cards don't charge interest, which makes them a good choice for people who might tend to overspend.

Kissich said she feels lucky that no checks bounced while the hold was in place, but that was just fortunate timing because no checks were being processed at that moment.

She said the situation arose after she bought gas from a Texaco station in Scottsdale on two separate occasions, apparently triggering two $50 holds that caused a problem when she later tried to make a purchase at a Wal-Mart store.

What annoyed Kissich was that she was not told that a hold was in place. "Consumers aren't given any clues anywhere along the line," she said.

The problem seems to crop up frequently with transactions at gas stations.

Consumer Reports noted a similar problem for a woman who bought gas from a Hess station in Virginia, and a Seattle TV station uncovered an incident involving a woman there buying gas at an Arco station.

Kissich said she was told by her credit union that the hold was placed by the gas station.

But Anne Peebles, a spokesman in Houston for Shell, which licenses the Texaco brand, said debit-card holds emanate from customers' banks and credit unions. The problem, Peebles adds, can be avoided if customers take their debit card to the station's cashier rather than pay at the pump, since the cashier can punch in the exact amount of purchase prior to the sale.

As noted, holds are possible with transactions where the final payment amount isn't known at the time the debit card is swiped, including hotel and rental-car reservations.

Even restaurant meals can cause a problem because cards typically are swiped before the tip amount is entered.

For consumers, the lessons seem clear: Favor credit cards for certain transactions such as hotel and rental-car reservations, and maintain enough of a cash cushion in your bank account to ensure a debit-card hold doesn't cause problems.

Reach Wiles at russ.wiles@arizonarepublic.com or (602) 444-8616.

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