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Debit card holds

Posted by raee (My Page) on
Sat, May 5, 07 at 12:35

G'day everyone--

I was thinking about the practice of businesses putting "holds" on sums of money well above the cost of the purchase, when purchased with debit cards. This can cause accounts to be overdrawn--and even if only by 10 cents, then you start accumulating daily overdraft charges--and those charges can put you into a hole impossible to get out of before you even know there was an overdraft--if your bank (like Chase) takes over 10 days to get a notice of the original overdraft to you & you don't have internet access to your account! This all happened to my daughter, whose income was not sufficient to overcome the bank charges (nor frequent enough, being paid every other week). She ended up over $300 in the hole, more than her paycheck, just from the hold triggering a chain of overdraft fees.

Seems to me the time is ripe for us (consumers) to start agitating for government action on this. Congress has its attention on issues of predatory lending in home purchases. I think this practice (by the banks as well as the merchants) is also predatory and I am writing to my congressman, senators, and members of the appropriate committees in congress to ask that they look into this and put limits on how much can be held and on how many times or how much the bank can charge for a single incident of overdraft, or even if overdraft fees can be triggered by a hold in excess of the purchase.

If you agree, I hope that you will also write or e-mail your congressmen and committee members, and ask others to also. I was able to help out my daughter, and even got some of the charges reversed by threatening to pull my accounts--but what about people who don't have help? It is just not fair, and that is not right.

Thanks, Raee


Follow-Up Postings:

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RE: Debit card holds

This situation doesn't make sense because the hold is only temporary until they clear the actual amount.

Restaurants will authorize your card for the food purchase plus a bit of a tip, then when you complete the receipt, it is cleared out usually that night or the next day.
I've never had a problem with holds causing an overdraft.

Why doesn't your DD use cash instead? This would completely alleviate the problem.


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RE: Debit card holds

the hold is only temporary until they clear the actual amount

That was not my experience. I purchased about $15 worth of gas. The gas co put a $100 hold on my checking account for several days!. This caused several checks to bounce even though there were sufficient funds to cover the gas purchase and the checks.

I don't mind the hold on a credit card, but that kind of hold on a debit card, for several days, is unconsciousable.


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RE: Debit card holds

well, cash is slower at the gas station.

I can see this happening, esp. for people who live close to the margins in their checking accounts.

You have $150 in the bank; payday is tomorrow.

You buy $25 worth of gas; the gas company puts a $100 hold on your account.
You buy $75 worth of groceries. You are now $25 over your balance, when you *thought* you were $50 below it.

Now you're paying overdraft charges, per day.

It's particularly dangerous and unfair to the folks who earn less.


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RE: Debit card holds

It's also totally unnecessary. As soon as the transaction is completed, they could debit your account the correct amount. That's what grocery stores do - at least every one I've shopped at.


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RE: Debit card holds

Seems to me the time is ripe for us (consumers) to start agitating for government action on this.

Or time to start not purchasing service from companies that cause you trouble. (i.e. that bank) Why does the government need to save you?


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RE: Debit card holds

Or, stop using a debit card -- credit card hold won't cause this problem. I agree -- let's not get government any more involved than necessary.


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RE: Debit card holds

Someone like my DD doesn't have (or want or need) credit cards. Cash only--on her college campus, unfortunately, a debit card is a safer option. She did change to a credit union--lucky for her that was an option--as nearly all banks engage in the same practice. Imagine living in a town without such choice.

Government regulation of banking practices is nothing new, but in fact has been loosened over the past several years, allowing the banks to implement policies that put their customers at great disadvantage--such as the CHECK21 bill, which allows a bank to debit your account immediately for transactions but take its sweet (self-determined) time crediting same for deposits. From a business point of view, that is smart, since it allows the bank to make money on YOUR money before you have access to it in exchange for the service of holding your funds for you--but unethical to the extent that it allows them to charge you overdraft fees, or low balance fees, or what ever other fee they choose to dream up, because they are deliberately holding your funds hostage.

I have never been a proponent of our government as the nanny of us all--a direction in which the US is headed-- & I would love to live in a society where government involvement was never needed--what would you name that utopia? Unfortunately, neither businesses nor individuals will often do what is right because it is right--therefore we HAVE a government, and laws, and regulations that pertain to business. I think that this is a situation that is perfectly appropriate and consistent with past regulation, and definitely necessary!


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RE: Debit card holds

let's not get government any more involved than necessary.

I *want* government involved when it's between me and business.

As Raee says, I can't trust the businesses around me to do the right thing. Government is my strongest arm to force them to do so. I don't actually believe that natural market forces are strong enough to offset the basic greed that drives business.


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RE: Debit card holds

How does a business have any business putting a hold for a larger amount on your purchase?

They don't know the card number till you present it for payment ... and at that time, they know how much they're entitled to remove, down to the penny.

So what's with this business of blocking $100. or whatever amount in your account?
____________________________

Business likes to tell about competition keeping the playing field level for all.

They love it among their suppliers, which means that they can offer lower prices for supplies.

They love it among customers.

They hate it among their competition, and will do whatever is necessary to get rid of it - when they get big, squeeze the little competitor, offer him half value for his small dairy business, and if her refuses, put milk into his service area below cost until his business is nearly dead ... then visit him to offer much less that the original offer.

Buy 'em up. Or squeeze 'em out. Get rid of the competitiors.

How many types of business do you know of where half dozen biggies don't have 80% of the market?

It's more pronounced in Canada than in the U.S. Why? You have stronger anti-monopoly laws.

But up here, we have the Old Boy network, and they help their friends.

As for that perfect place that you were talking about?

It's a 6-letter word, starts with "H", ends with "N" - as different from the other place, a 4-letter word ... also starts with "H", ends with "L" (and only actually uses three letters, as it repeats the last one).

Sort of funny, actually ... Christians tell of what a great place Heaven is ...

... but how many have you ever met who were in any hurry to get there?

Have yourselves a lovely week, all.

ole joyful


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RE: Debit card holds

"I don't actually believe that natural market forces are strong enough to offset the basic greed that drives business."

Market forces are strong enough to make an impact if consumers (the market force) take responsiblity for their own actions and quit doing business with companies that jerk them around. We need to start doing that instead of being passive and apathetic and expecting the government to take care of everything for us. The US goverment is so bloated and inefficient and over extended it's ludicrous to keep thinking it can take responsibility for all this stuff.


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RE: Debit card holds

I must be missing something! Or maybe I just have a very good bank. When I use a debit card while shopping I can see a pending charge against my account as soon as I get home and log into my checking account. It is only the amount I actually spent and clears by the next day.

The only time we have ever had a hold is when using a credit card to make reservations at a hotel or for car rental and that usually is a hold for the projected amount based on how long our reservations are. I would never use a debit card for for this kind of transaction.

I would check other banks and pick one that has a policy that only allows actual amount to have a hold put on any purchase until it clears. I wouldn't put up with this anymore than I would put up with being charged to use my debit card. There are way to many banks to choose from.

Also agree that the government is overburdened, under funded, wasteful, have know idea what happens out here in the real world of us taxpayers, don't really care. Why would anyone expect the government to be of any help in a banking situation when they have know idea where all there money is. I should say our money!


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RE: Debit card holds

I *want* government involved when it's between me and business.

I'll take freedom.

As Raee says, I can't trust the businesses around me to do the right thing.

But you trust government employees? You ever try to get help from the government?

Government is my strongest arm to force them to do so. I don't actually believe that natural market forces are strong enough to offset the basic greed that drives business.

You think you can effect the behavior of the organization with a monopoly on the use of deadly force?

Government is about the last thing I trust for help. In 200+ years our government has done 2 things well. Not great odds.


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RE: Debit card holds

Oh, I agree that many government agencies are wasteful, bloated, some even unneccessary. I don't believe that it is the responsibility of the government to create or protect jobs, for example--although I would sure hate to lose mine!

Others function quite well and are very necessary.

How many of you really want to keep accounts in a bank that is not FDIC insured? How about one that is not required to follow standard accounting practices? Feeling nostalgic for the savings & loan debacle of the 1980's? Or the runs and closures of the 1930's? How about abolishing the SEC? It's a fact, the government has been involved in regulation of banks and commerce since the founding of the country!
I am proposing government rules well within the existing framework of banking regulation.

And again, she did have a choice and exercised it. But I bet that there are many people in towns without multiple choices. Even in large cities it can be difficult to take advantage of the choices if you are of low income and limited transportation. The market force theory is negated if the segment of the market that is affected (low income, small balances) is quite small compared to those who would rarely have to think about this.

To not ask for reform on this issue would be passive and apathetic indeed!


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RE: Debit card holds

Don't forget that the S&L debacle of the 80's was also triggered by changes instituted by our government. Income tax law changes made the ownership of real estate much more financially rewarding, which of course created a higher demand for real estate, thereby drove up the price. Developers saw a fabulous market and built more and more office buildings, shopping centers, apartment buildings, etc.

At about the same time S&L's were allowed to invest in more types of loans and other investments. This was done in part because they were being creamed holding long-term low-rate home loans and paying out high interest on deposits. 15% CD's were not unheard of at that time, and 12% were common. Meanwhile the 30 year mortgages they had made a few years back were only paying 5 or 6% interest to the S&L's.

These changes were both made by the government, but not as a concerted effort. In each case the laws were changed to address one issue.

Then, at about the same time most S&L's had a lot of money lent on overpriced real estate, Congress decided to change real estate tax laws again - making real estate a less attractive investment. Not surprisingly, real estate values tanked at a time when many markets were way overbuilt to begin with. S&L's were left with loans that had looked solid at one point and found themselves having to foreclose loans on buildings that they couldn't sell and could sometimes could not even lease out.

Yes there were crooks in the S&L business, who helped ruin some institutions, and we all read about those. But plenty of honest institutions found themselves in severe trouble as well. I worked for a life insurance holding company, managing income property loans. I made a career change just before the bottom dropped out, but I still talked with several people who had to deal with that mess.

In the case of my former employer, they stopped making new loans in Texas when the markets started getting overbuilt. But they still had plenty of existing loans when the markets tanked. Being a nationwide company, only a small percentage of their loans were in severely depressed markets. But S&L's generally lent in their immediate area, or at least their home state. I don't remember if this was due to regulation or custom. At any rate, even the best-run S&L in many markets nearly collapsed.

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Whew, I didn't mean to write so much! At any rate, my point is that the best-intentioned body of lawmakers will never understand every ramification of the laws they pass. They can easily cause as many problems as they fix.

In the case of the unreasonable debit card holds, it really is a minute percentage of institutions that do this. In this case, I believe the gas station is the party at fault. In the whole debit-card system, banks have no way of verifying the amounts that merchants submit. Most merchants are honest and reasonably careful - if for no other reason than that they want repeat business.


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RE: Debit card holds

In the case of the unreasonable debit card holds, it really is a minute percentage of institutions that do this. In this case, I believe the gas station is the party at fault. In the whole debit-card system, banks have no way of verifying the amounts that merchants submit. Most merchants are honest and reasonably careful - if for no other reason than that they want repeat business.

liz, I think you hit the nail on the head. The only experience I've had with a debit card hold was with Arco. It's been several years since it occurred and I don't know whether they are still doing it. They lost two customers permanently (myself and DH).


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