What you need to know about credit card, debit card 'holds'
Holds and blocks can block off big chunks of your money
Swipe a card at the gas pump or check in to a hotel — or any place where your final total isn't known — and merchants often place a temporary hold on the account. The purpose is to make sure you can pay for that tank of gas, or for raiding the minibar on your way out.
"They’re used in situations where the total purchase is not known and cannot be easily returned," says Gray Taylor, executive director of Conexxus, a nonprofit that creates technology education and standards for the convenience store and retail petroleum industry.
Holds can confuse consumers
Holds (sometimes called "blocks") can sometimes confuse consumers because there are three parties involved:
- The card networks (Visa, MasterCard, Discover and American Express) can set outside limits on how long a hold can last. For instance, a Visa hold can't exceed 30 days. An American Express hold can't last more than seven days for most of its cards, and no more than 15 days for its Bluebird and Serve products, according to a company spokeswoman.
- Individual card-issuing banks set the actual deadlines for how long a specific hold will remain. That can vary by bank, retailer, type of purchase and transaction, and cardholder.
- Merchants set the size of the hold. But the merchants don't ever receive that hold amount. They only receive the final transaction amount (otherwise known as your real total).
Compounding the confusion, hold times can sometimes differ between credit and debit cards, too.
With holds, the merchant electronically asks your card issuer, in advance, if you're good for a certain preset amount, says Shelle Santana, professor of business administration at Harvard University. On the other end of that electronic conversation, your card issuer sets aside that amount.
With a credit card, your credit line is temporarily reduced by the hold amount; with a debit card, the available balance is reduced. When the purchase is totaled, the difference between the hold and the purchase is credited back to the consumer.
Hold times vary
Hold times could be minutes, days or even a week or more, depending on a mix-and-match of elements, including the type of card you use (credit or debit), the way you used it (PIN or signature), the bank or credit union issuing the card, the merchant involved, your own history and even the day of the week.
Use a debit card and PIN at the pump, and in a majority of cases, that money is back in your account "minutes later," says Ravi Subbaraya, the product manager for checking and payments for PNC Bank. He tested it recently, and his banking app showed the unspent remainder of a $50 gas pump hold returned to his checking account before he got back in the car. "Most fuel tends to process much faster," he says.
Issuers set card-hold durations
Your card issuer — the bank or credit union that services your account and sends you monthly statements — not the merchant or card network (think: Visa or MasterCard), determines how long that hold money is gone from your account, says Jeff Lenard, spokesman for the National Association of Convenience Stores.
Visa rules allow issuers to keep a hold in place for up to a month, though few if any issuers do that, says Visa spokesman Andy Gerlt. More likely it's one to five days, he says.
Andrew Urbaczewski, professor of business analytics at the University of Denver, agrees. While holds can be as long as five days, "it’s gotten a lot better now," he says. "The average is about two days." And "Some companies will only put the hold on if it's a debit card. They won't do it with a credit card."
But the merchant never sees a dime of that hold money — only the amount you actually spend, Taylor says. "This is our frustration," he says. Some banks will tell the consumer that "the merchant is holding your money," Taylor says. "That's not true. We never see that money."
Making it more confusing: Issuers can have different hold rules for different merchants and different types of sales. So that hold for gas at the pump might come off almost immediately, while the hold from your hotel stay remains a day or two after you check out.
Concerned that holds are lasting too long? That’s a conversation you want to have with the bank or credit union that issued the card, says Lenard. And "How long do your card holds last?" is a smart question the next time you're shopping for a credit card, bank or credit union.
Merchants set hold amounts
Merchants do set the hold amounts, Lenard says. At gas stations, which commonly use holds, they want to set an amount high enough to cover a fill-up for a fairly large tank, he says.
But hold amounts don't necessarily change with the price of gas. Merchants "tend to not adapt these holds too often," he says. They "tend to set up a hold amount and keep it."
At the pump, holds can run the gamut from "$50 to $125 depending on the store," says Lenard.
Card networks, such as Visa and MasterCard, require merchants that process cards before the purchase total is known (as when you swipe before you pump), to either use holds or cover any losses resulting from those charges, says Lenard. If merchants use holds, card networks absorb losses and chargebacks, Taylor says. "If a merchant doesn't do a debit hold, they will be eaten alive by chargebacks."
While hotels and motels often use holds, their policies have made it easier for cardholders in the past several years, says Nessa Feddis, a senior vice president for the American Bankers Association.
It used to be that if you checked into a hotel for two weeks, the hotel would put a hold on your card for the entire amount of your stay, she says. Within the past few years, hotels have switched practices, and many now place a few smaller holds throughout your stay, rather than blocking one large amount at check-in, she says.
Avoiding card holds
There are a handful of ways to avoid card holds. Each has its own challenges:
- Go old-school and pay cash at the pump. Not always convenient.
- Limit your purchase. Have the clerk authorize your pump for a limited amount before you swipe your card, "like $20 on pump seven," says Urbaczewski. Since your final total is known, there's no hold. And you can often do this over the intercom at the pump. But it means either yelling into a speaker or going inside.
- Use your debit card with a PIN. Because these transactions travel over a different network, the unused portion of the hold is often returned quickly — in some cases in just minutes, says Visa's Gerlt. With PIN debit, MasterCard recommends that card issuers return those overages within an hour, says Beth Kitchener, spokeswoman for MasterCard. But "issuers ultimately decide what they are going to do," she says. The downside: Consumers may give up some liability protection with PIN-based transactions, while signature-based transactions are often 100 percent protected, says Gerlt.
- Ask about hotel holds in advance, says Santana. How much it will be and how often will it be charged? See if there's any leeway in the hold amount.
- Find out what's required it you want to pay cash. "It's a little more difficult, says Urbaczewski. "Some of them will require a larger cash deposit. Some of them are happy if you pre-pay."
- Ask for a temporary credit-line increase. While this doesn't avoid holds, it's one tactic to cope. If you're going to be traveling and suspect that holds might eat up your available credit line, you can ask a credit card issuer to bump up your credit line for the duration of your trip, says Gerlt. The issuer will likely review your credit. And if it does a formal "hard inquiry," that could knock a few points off your credit score.
When it comes to consumers avoiding holds, "The options are limited," says Santana. "The larger the hold, the larger the problem."
See related: Revoking automatic debits from your account
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