Retailers are not responsible for the amount of the hold or the length of the hold when a customer conducts a signature debit transaction
Sourced from the National Association of Convenience Stores (www.nacsonline.com):
Retailers are not responsible for the amount of the hold or the length of the hold when a customer conducts a signature
debit transaction; both the amount and the length of the hold are determined by the bank issuing the debit card.
- Both Visa and MasterCard require that retailers place "preauthorizations" of $1 on signature debit (check card) and credit cardgas purchases. Once the transaction is preauthorized, the bank that issued the debit or credit card places a "hold" on that account.
- Holds are not unique to gas purchases: they are standard practice for any business that accepts plastic as a form of payment in a situation where the final dollar amount to be assessed is unknown in advance. Holds placed on gas purchases are similar to the preauthorizations that hotels do with a credit card when someone checks in or with car rentals.
- Most holds today are between $50 to $100 to approximate the cost of a fill‐up.
- Under all normal circumstances, it's not the retailer who is responsible for continuing the hold, since credit/debit card network rules make it impossible for the retailer to extend the hold.
- For signature‐based debit transactions (such as using a check card as a credit card), holds, like the holds on credit cards that can affect someone's spending limit, can remain for 48‐72 hours, since the processing times are slower. Generally, they should last a shorter period of time. Retailers conduct "batch" transactions at least daily; any time that the hold lasts beyond that time for signature‐based debit is due to bank settlement processes.
- Retailers have nothing to gain from holding on to consumers' money – it freezes accounts that could be used to spend money in the store. Further, retailers do not benefit from fees incurred from overdrafts that happen as a result of unanticipated holds.
PIN‐debit transactions are the only debit transactions in which the retailer controls the amount of the hold. However, these are real‐time and holds should be released immediately.
- For PIN‐based debit transactions, which are real‐time, online transactions, the hold should last minutes. When consumers swipe their cards and the pump says "authorizing," that is when the hold is being charged to the customer's account. After the fill‐up is complete, the issuing bank is automatically notified, and the hold amount should immediately change to the amount that the customer actually purchased.
- Retailers set the amount of the hold for PIN‐debit transactions. Because the processing time is nearly instantaneous, the consumer would likely never be affected by the hold, even if he or she was to use the debit card right away for an additional purchase.
- Retailers face challenges with the amount they set the hold for with PIN‐debit. If the amount is too high, it might deny a potential customer the opportunity to fill up, since the amount of the hold must be available in the account. If, for example, a customer only wants to get $30 because the debit account is low, the transaction could be denied if the hold is $75 and thecustomer doesn't have that amount in the account. If the hold amount is too low, the retailer risks not getting paid by thebank. Retailers are liable for the full amount of the transaction, even a valid one, if they accept a transaction amount higherthan the hold amount. The customer ends up getting charged by the bank, but the bank keeps the money and does not give it to the retailer (known as "Reason Code 96").
Customers on tight budgets can make choices about what is best for them.
- If you want the hold to be released immediately, pay where you can use your PIN, since PIN debit transactions should beregistered immediately. An increasing number of stations – an estimated 60 percent – also have PIN pads at the pump.
- Consumers should ask their banks what is the policy is regarding the length of debit holds. If the hold lasts longer than a few minutes for PIN‐based transactions, or longer than three days for signature‐based debit transactions, customers need to discuss the matter with their banks to learn why the holds are lasting so long. Most banks print their phone numbers on the backs of their cards.
- When posed with the option of credit or debit, consumers should always choose the PIN debit option because that transaction will be immediate, whereas a credit or signature‐based debit transaction can take days. Plus, PIN‐based debit is much more secure for the customer.
- Also check online bank statements regularly and call the bank if when something looks out of the ordinary on a statement.