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Holds and paying with plastic: What you need to know! - Tuesday, October 01, 2013
Plastic has revolutionized the way we spend money.  Credit and debit cards are accepted everywhere, but have you ever wondered what happens once you swipe your card?

Most of us don’t think about the authorization process unless we hit a snag, which can be extremely frustrating and potentially costly.

What is the purchase process?
Upon swiping your card the purchase becomes a pending transaction, and then the merchant "posts” the sale to your account which finalizes the transaction.   Most transactions post in 24 hours, but it can take up to three days for purchases to be resolved.

What is a hold?
As a protection for merchants, debit/credit card issuers, and consumers; accounts may be "pre-authorized” to ensure that funds are available for individual transactions.  A hold can be placed on the account to secure those funds for the merchant, which means those funds will not be available for other purchases.  Holds on debit cards freeze cash in your checking account while holds on credit cards reserve a specific portion of your available credit.

Can I see all the past purchases, holds and pending purchases?
On credit cards, purchases which have posted to your account are visible but holds and pending transactions cannot be seen.  These pending purchases will be reflected as a decreased amount of available funds, but they will not be individually listed.

Demand for payment conveniences:
If you use your debit or credit card at a merchant where the final total is not known, such as in a restaurant or at a fuel pump, the merchant can ear mark (or hold) funds to cover the estimated cost of the purchase.  The account will resolve once the final amount has been posted.

Holds at hotels:
Many hotels have a minimum hold requirement upon check-in and necessitate a card for that purpose, even if you plan to pay by cash or check.  These holds can start at $150 and go up depending on the hotel.  When using a debit card while at hotels, verify their hold policy to ensure that you have sufficient funds in your checking account to cover other transactions that may come through during your stay.

What consumers need to know:
Credit card holds only reserve potential credit, but debit card holds can freeze funds in your checking account meant for other purchases which can cause those purchases to "bounce”.  Credit cards allow you more consumer flexibility as well as many consumer protections, which can be an added bonus for tight budgets.



 

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