Hi,

I am having trouble finding any information on how banks handle funds on "hold" for a Visa purchase. If anyone knows the rules, it would be a member of this forum. I realize you are very busy, and will try to keep this as brief as possible. I appreciate any guidance or clarification.

My question relates to Visa cards and how banks handle Visa Check Card "holds".

If I use a Visa credit card, I know a hold may be placed on funds to guarantee payment to the merchant. When funds are blocked, I know my bank will not release the funds to another company or to my available balance if I ask or even demand that the hold be lifted to allow a new transaction. To release the hold, I know a merchant can call a card issuer and void an authorization from being settled. When the merchant does this, they give up their right to claim those funds. A "hold" allows the merchant to capture/settle an authorized block of funds without worry. Under this scenario, I have been told that the merchant captures the actual funds that are blocked. In other words, the bank doesn't remove the hold, make the funds available in the cardholder's account and then pay the merchant from the cardholder's new available balance. If card issuers did this, the cardholder could exceed a card's limit by guaranteeing a block of funds to multiple companies. If the actual funds are simply "held" for the merchant until the merchant submits the final sale, then why would this claim change at midnight when the merchant's sale transaction is processed by the bank?

When I use my Visa Check Card at a Visa merchant, I know the transaction is processed through Visa, not ACH or EFT. I know this because a Visa logo shows up next to the transaction under my account. If I use my Visa Check Card at a merchant that converts the funds to ACH, then I can tell it was converted because there's a Federal Reserve icon next to the transaction.

Reading Visa's posted information on a Visa Check Card, the following jumps out at me:
(http://usa.visa.com/personal/cards/debit/visa_check_cards_faq.html#anchor_1)
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Important Visa check card facts
* The amount of your purchase is deducted from your checking account automatically, so be certain you have adequate funds at the time of purchase.
(snip)
* To meet consumer demand for payment conveniences such as express/video checkout at hotels, pay-at-the-pump fueling, and one-swipe payment at restaurants, Visa has established processes to protect Visa check card issuers, merchants, and cardholders. Similar to how check deposits can't be immediately withdrawn, account deductions can't immediately be cleared when the final amount isn't known, this typically applies to hotel, restaurant, and pay-at-the-pump gas station purchases.
* For example, you may use your Visa check card at a restaurant and your card gets authorized before the tip is applied. For these types of purchases, Visa check card issuers may earmark cardholder funds to cover the estimated cost of the transaction. This process, known as a "hold", safeguards both cardholders and merchants, ensuring cardholders don't spend more money than they have and merchants are paid for the transaction. While most transactions have a less than 24-hour hold, Visa protects cardholders by requiring issuers or financial institutions to remove all holds within 72 hours.
* Some financial institutions charge transaction fees to customers who make Visa check card purchases or get cash back at supermarkets using a PIN. Ask your financial institution about such fees before using your Visa check card.
* Many Visa check cards have daily cash withdrawal limits of up to $1,000, and daily spending limits may be even higher. These spending limits are meant to protect you in case your card is stolen. Your card may be declined if you make daily purchases that exceed your daily withdrawal limit, even if you know you have plenty of funds within your checking account. You can always ask the bank to lower or raise your purchase or withdrawal limits to suit your spending habits.
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The above tells me that a bank can put a "hold" on funds to guarantee funds availability to the Visa merchant. The process is just like spending cash in my wallet but there's a short delay between when the time of purchase and the time of payment to the merchant. The "hold" concept was created to protect all parties involved in a Visa Check Card purchase.

"Important Visa Check Card Facts" say to me, as a consumer that:
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> Consumer benefits (according to my understanding of Visa's site and check card literature):
- A "hold" of funds protects a cardholder from overdraft by "ensuring cardholders don't spend more money than they have...";
- A "hold" confirms "adequate funds at the time of purchase" and the funds are instantly blocked for that purchase just like giving a cashier a $20 and knowing that $20 will eventually appear in the merchant's bank account as a deposit;
- A "hold" prevents bounced checks as paying with my Visa Check Card is the same as paying with cash (provided the merchant processes the transaction timely and captures the funds on "hold" -- this almost always happens in 1-2 days of a purchase and well before a "hold" drops from a bank's system);
- A cardholder receives a certain amount of personal security that's not possible with "cash" purchases.
--Visa Cards include fraud protection & safeguards provide a reliable method to identity verification. This protection is built into Visa's payment system using a various methods (PIN confirmation w/swipe, signature w/swipe, AVS/CVV2 verification in card "not present" environment, etc.).
--Visa Cards allow a cardholder to spend cash without risking theft or loss of physical cash.
--Visa Cards allow card issuers and merchants to offer cardholder benefits based on spending volume. Depending on the card and company/bank, it's possible that a cardholder can accumulate rewards & incentives for card loyalty, such as airline mileage, gift certificates, special offers, cash back, etc.

> Visa Merchant protection:
- Approved authorization guarantees payment to the merchant, just like a Visa credit card authorization.
- Merchant avoids problems with counterfeit/forged paper payments, bounced checks, and unexpected returned item fees.
- Merchant can utilize various tools to detect and prevent fraud (minimizes the merchant's risk of loss).

> Visa Card Issuer (the bank):
- A bank (card issuer) can prevent loss from possible cardholder abuse and excessive overdrafts by blocking funds at the time of purchase.
- A bank is able to guarantee payment to a merchant by putting a "hold" on the purchase amount.
- A bank is protected from customers with excessive overdrafts (in most situations) as the bank blocks the funds to guarantee the amount to a merchant with confidence of funds availability.
- A bank is protected from liability that could arise from a merchant's error with "blocked" funds or excessive "hold" amounts for extended periods of time, as the merchant is expected to capture an authorization timely.
- A bank receives additional fraud protection by offering a card with tools in place that help merchants prevent fraudulent purchases.
- A bank can reverse funds in certain cases, which protects the bank from excessive loss and unscrupulous merchants.
--

I have a Visa Check Card with a major US bank, and also have a Visa Check Card with a small US bank. The two banks have completely different interpretations of Visa's Check Card rules and the real purpose of "held" funds after the merchant captures the authorization. I can't seem to get a direct answer on why the banks view "held" funds differently. According to my smaller banker and a Visa representative, it is impossible for a blocked transaction to overdraw a checking account when "held" funds are captured by a merchant before the "hold" is removed.

I also utilize various online banking and payment systems, like PayPal. Most payment services, like PayPal, require a customer to setup and verify a new account by confirming small credit/debit amounts made to the customer's checking account. This is an additional layer of verification that works in conjunction with AVS or CVV validation on a customer's credit card. Most payment services require a checking account as a "default" funding source because it protects the service from credit card chargebacks and saves the service money. If an instant transfer/EFT or check card purchase is declined, the service will simply default to the next funding source to make the payment. These services don't penalize a customer for declined transactions, as the ability to setup/bill multiple funding sources is beneficial for their customers. Under their system, the customer always pays without "decline" or "OD" fees, and merchants always get paid on time. It's a win-win for all parties involved because there are no penalties…. That's unless you're dealing with a bank that [b]refuses[b] to decline transactions in select situations.

I honestly wouldn't mind an occasional "courtesy" overdraft if I made a mistake. However, it appears that either Visa's cardholder agreement, pamphlets and FAQ are wrong, or some banks are benefiting from the "guaranteed payment" and "hold" by holding until the merchant captures and then, paying the captured funds to other debits. However, some banks are holding funds for Visa Check Card purchases, and then releasing those funds to the proper merchant when the final sale is received. While others will make the funds available for a split second at minute (after the merchant captures the "hold" to collect payment), and then cause OD fees on the previously "blocked to guarantee funds" amount. Shouldn't the block of funds be paid to the Visa Check Card merchant if the bank originally blocked the funds to guarantee funds availability to that merchant?

Unfortunately, most people view Check Cards as a form of cash and use it out of convenience. Keeping a check register is meaningless if guaranteed funds are not paid to the proper company when that company captures the authorization timely to collect under Visa's terms. Viewed as a form of cash, Check Card transactions generally include small purchases and at times 5-10 small transactions in one day where the funds are/were blocked and properly captured by the merchant in one day. Normal bills are generally larger but with today's technology, many customers rely on payment services or billing contracts that include multiple funding sources. If the bank pays a large item with funds that are guaranteed to a Visa merchant, I would think any OD would be charged on the amount that the bank chose to honor when it wasn't authorized, blocked or guaranteed by the bank. Some banks do this, and others don't do it.

I know banks can post transactions in any order, but in this situation, shouldn't Visa's terms apply if the transaction comes through Visa? Based on my understanding, the bank is technically a vendor reselling Visa's product to allow their customers the convenience of Visa's payment system. Visa advertises their system combined with a check card provides the cardholder security and protection. As a result, isn't the bank required to pay a Visa merchant first, assuming the merchant captures a block of funds before the "hold" is released? The bank does claim that they are required to block the funds because the payment is guaranteed and it protects the bank's interest by paying the merchant with available funds.

I appreciate your time and knowledge in this area, and hope you can shed some light on how banks should be handling these transactions. Again, I have two banks. Only the large bank has a habit of paying the "held" funds to someone else after the Visa merchant captures the sale to collect payment.

Also, I wish to add that I do not want or use OD Protection, and have asked for unauthorized amounts to be refused if funds were blocked/captured for a Visa merchant. Furthermore, I have opted out of the Matrix (at least a dozen times by now) by having the CSR set my account's limit to zero. If my available balance, not my balance with hold amounts included, is not sufficient for a new check card purchase, a check presented to a teller at a branch, or an ATM withdrawal, then why do unauthorized transactions without a guarantee get paid at midnight with blocked funds if the seller processes that sale to capture the block? I would prefer to have all transaction refused if my balance is not sufficient after "held" funds are paid to the rightful owners. Am I wrong to think that Visa's merchants should get priority since funds were blocked as a guarantee?

Unbelievable!

After I posted this thread, the definition page for funds on "hold" and pending transactions at BofA's web site changed. Why is that? What is the bank hiding?

I have screenshot of both pages before and after the change. The wording has changed to fit the bank's needs to collect OD fees on funds that the customer couldn't access but only when the conditions benefit the bank.

Whenenver I access Online Banking, I screen capture the page, save a copy locally to my harddrive, and print a copy because I know the bank pulls a trick at midnight. It is harming consumers who view their Check Cards like cash, and could previously rely on "holds" to mark spent money. This is complete abuse by the bank. I can't even imagine how devestating their actions can cause on other people's lives. It's not right. A consumer should have rights to refuse OD payments, and a right to feel secure when funds are on "hold" as a "guarantee" for a purchase.

As a Visa merchant, I am also outraged that the bank could wreck havoc on someone's life when I think I've blocked funds from existing cash, and the cardholder believes I'm paid from existing cash.

This is a complete abuse of control over other people's money.

On August 20th, BofA's web site said:
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Transactions:
Your transaction list contains your cleared and pending transactions up to the date you specify in the Go to drop down box.

Cleared transactions are transactions that have been processed completely through the bank's system, and posted to your account. "Cleared" transactions are not always final, as there may be certain circumstances under banking laws and regulations when such transactions may be reversed.

Pending transactions refer to credits, debits and holds that have not yet posted to your account. Only certain types of transactions will be temporarily displayed as pending transactions, and the time it takes for a transaction to be displayed as pending after it is initiated may vary. We may debit or place a hold on your account for a debit transaction either on the day it is presented to us for payment by electronic or other means, or on the day we receive notice of the transaction, whichever is earlier. When you use your PIN for an ATM or Check Card transaction, the transaction generally posts to your account on the same business day if completed prior to 4:00 p.m. local time. Check Card transactions made without a PIN may take several business days to post.

If a merchant or another financial institution requests an authorization for a transaction you want to conduct (a pre-authorization request), we may place a hold on your account for the amount of that pre-authorization request. Some merchants may request pre-authorization of an amount either higher or lower than the actual transaction amount which ultimately posts to your account. While we place a hold on the pre-authorized amount, your account will only be debited for the actual transaction amount when the transaction is processed. While the hold remains on your account, the balance available for subsequent card authorizations is reduced by the amount of the hold. However, this hold will not affect the payment of other withdrawals such as checks, electronic funds transfers, or previously authorized card transactions that are posted to your account before the pre-authorized transaction is received. The hold will not prevent the pre-authorized transactions from overdrawing your account if sufficient funds are no longer available when the actual transaction is posted to your account. We are not responsible for damages or losses of any type, including wrongful dishonor, if any transaction is not authorized because of a hold. We will remove a hold from your account when the actual transaction amount is debited from your account or up to three business days after the pre-authorization request (one business day for certain types of transactions), whichever occurs sooner.
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As of Sept 3, it says:
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Your transaction list contains your cleared and pending transactions up to the date you specify in the Go to drop down box.

Cleared or posted transactions are transactions that have been processed and posted to your account.

Pending transactions include credits and debits that have not yet posted to your account. They may also include holds applied to certain transactions or to your balance. Pending transactions are listed in lowest to highest dollar amount order, and are not listed in the order that they post to your account. A transaction made with your ATM or Check Card using a PIN typically is processed and posted to your account on the same day that the transaction is made, or on the next business day. A transaction made with your Check Card but without your PIN, may take several business days to post to your account.

When we approve a request to authorize your debit card transaction, we may reduce the available balance in your account by the amount listed in the request by the merchant. Your remaining balance must be sufficient to cover checks and other debits that post to your account, or you may incur charges such as overdraft or returned item fees. When the check card transaction posts to your account, or after 3 business days, we add this amount back to your available balance. The amount is not applied to any specific transaction or item. Some check card transactions may not show as pending transactions and may not affect your available balance until they post. In some cases the amount of the pending transaction may not match the actual amount of the transaction. This is because some merchants request us to authorize a nominal amount such as $1 or the amount that they estimate you will spend, which could be higher or lower than the actual amount of the transaction. When the transaction posts, your account is charged the amount of the transaction presented by the merchant.
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I copied the page 2 weeks ago because I know it said something else in the past about funds on "hold" and declined transactions. Now, fund on "hold" are available once the merchant processed the transaction. It's not right!

How can they do this? I've been sending questions about this to the OCC, and knowing BofA plays these games, I started doing screen captures of these pages. I can show you guys the images too. They literally change the text to fit their needs to justify OD fees.

A consumer gets used to one system, and then the bank changes their "policies" while they act like it's always worked the way you believed it worked. This is proof of change. They can't keep hiding behind excuses in the Regs. We can post in an order and refusing to deny transactions to cause OD on funds that are on "hold" for a merchant who processes promptly.

Please see our response to your other discussion on this topic.