If you’ve ever used your debit card to make a purchase (and with a growing number of consumers choosing debit over credit, there’s a good chance that you have), you may have noticed that a hold placed on your account by certain retailers is higher than the actual cost of the purchase.
“After a debit card is swiped for payment, certain retailers 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,” Bill Hardekopf of LowCards.com and current contributor to TheStreet.com explains. “This reduces the risk that the customer will be overdrawn and leave the merchant unpaid.”
Many restaurants, for example, will authorize a debit card for $2 to $3 more than the bill’s total to make sure consumers have enough money in their account to leave a tip on the debit card. Hotels, additionally, have been known to put a hold on 120% of the cost of your room in an attempt to cover any unexpected incidentals that occur during your trip.
“A big surprise can also happen at gas stations,” Hardkopf adds. “If you use your debit card at a pump that does not require a PIN, your bank may block out as much as $50 to $75.”
Merchants are essentially making sure that you have enough cash to cover everything you end up owing them. While the actual charge is not put through until the merchant submits their batch of transactions and the banking system transfers the funds, you will still see a discrepancy on your checking account. You also won’t have access to the difference, which could lead to a card being declined unexpectedly, or for those who have overdraft protection, finding their accounts overdrawn and subjected to fees.
“The problem comes if your balance is low or if multiple payments hit at the same time,” Hardkopf explains. “The hold can lead to costly charges for insufficient funds if you still have overdraft protection on your checking account.”