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Home >> Accounts >> ATM/Debit Cards
Holds and Debit Cards: Big Mess!
I have a checking account with a small, local credit union. They have provided me with a Visa debit card linked directly to my checking account. When I make a purchase using the debit option and enter my PIN, a hold is placed on my account for the amount, until the funds actually clear the CU. I understand this is normal. However, I have noticed on several instances that some holds will remain on my account for 10-15 days before being processed and released. Some of them will be processed and the purchase amount will show up on my account, however the hold will still be there. Who is responsible for releasing these funds? My CU tell me its the retailer. The retailer tells me its my CU or the network (STAR) handling their debit cards. Who is right? How can I stop this from continuing. One retailer told me that regulations state the hold must be released within two minutes to two hours of the purchase. Where can I find these regulations to read myself? This has really become a problem, because the funds will be on hold and a check or other card purchase wont go through, when the funds technically are there.
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 The credit union representative is not deliberately misleading you, but it is most definitely not the retailer's responsibility to release holds originating from debit card authorizations. That is the responsibility of the depositary institution that holds the account, and is most often completed by the institution's service provider.
Good quality debit card authorization systems generate holds that are matched up with actual dollar transactions when the transactions actually arrive for processing. If the transactions are signature-based (you sign rather than enter your PIN at the point of purchase) or originate over the Internet or telephone, there is usually a delay of one to three days after the authorization before the live transaction is processed. The matching process is designed to purge the matched authorization holds at the time the dollar amount is actually posted to the cardholder's account.
Of course perfect matches don't always occur. Sometimes authorizations are for more or less than the actual transaction ($50 or $1 authorizations at gas pumps regardless of the actual purchase amount, or restaurant authorizations with a built-in 20% tip inflator, even if the tip is not added to the transaction by the cardholder are examples), and sometimes a match doesn't get made for other reasons. Accordingly, a lot of systems have a card-issuer option to "age off" holds after a set number of days. Some even allow for a short age off period of, for example, three days, with a longer period for specific types of merchants (hotels, car rentals, etc.)
Your credit union may not realize that it can shorten the age off period. If it cannot or will not make that change for its members, you retain the option to "vote with your feet" and take your business elsewhere, or to use a credit card for purchases. For what it's worth, there is a proposed regulatory amendment that would encourage, but not force, card issuers to drop holds more rapidly, but otherwise, there is no regulation that mandates how authorization holds are managed.
Published on BankingQuestions.com 5/04/09
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