When good debits go bad
Published: Saturday, January 28, 2006 at 6:01 a.m.
Last Modified: Saturday, January 28, 2006 at 12:00 a.m.
Debit cards are, for many, the ultimate in convenience.
A handy credit card/bank check card in one, it can simplify shopping by removing the need to carry cash or write out a check. Just swipe it through the machine, key in your personal identification number, decide whether you want cash back or not, and you're done.
Consumers continue to be taken by surprise when they find their debit card isn't working after a pay-at-the-pump gas purchase, or isn't accepted for multiple-day stays at hotels and motels.
This is because their financial institution has placed a "hold" on their account, sometimes as much as $100.
Dean Angier of Gainesville found this out the hard way. He bought gasoline at a Kangaroo gas station and when he made his next stop, his debit card was turned down.
He made a few calls and found out there was a $100 hold on his PayPal credit/debit account, even though he had only bought $20 worth of gas. There wasn't enough left in his account for a second transaction.
This is a legal but little-known practice called credit card blocking, but don't blame the gas station or store. Often it's the fault of the bank issuing your card.
In order to protect check card issuers, merchants and cardholders, place "holds" of varying amount on the account by some merchants and banks when the final amount of a transaction isn't immediately known, such as lodging, restaurants or gas stations. Similar to how many check deposits can't be immediately withdrawn, account deductions can't immediately be cleared, even though the transaction has been authorized.
The Florida Department of Agriculture and Consumer Services reports getting "a number" of complaints about this happening. Hess gas stations placed stickers on their pumps when the "hold" reached $75, but people often overlooked them.
No one seems willing to take the blame.
Ed Collupy, a spokesman for The Pantry, which operates nearly two dozen Kangaroo stores in the Gainesville area, said "we take some additional risk with people using credit cards, especially since the price of gasoline has increased. But it's the banks that are putting on the hold, not us. We have no idea how much is being frozen, because everyone has a different bank card."
Collupy retrieved a memo from Kangaroo about debit processing he received following up on a 2000 customer complaint stemming from Gainesville.
The memo read, in part, "The release of funds in a cardholders' bank and the time frame which it takes is controlled by the ISSUING BANK of the debit cards. With online debit (when the cardholder enters their PIN number) the pre-authorization places a freeze on the amount in the cardholder's account at the bank. This is done to ensure that the cardholder has the funds for the transaction and to prevent the funds from being used for other transactions. . . .
"The suggestion is that the cardholder take this issue up with their bank. Unfortunately, the typical bank points the finger to the merchant and claims no foul," the Kangaroo memo continues.
Most consumers don't notice these larger holds on their cards because they have sufficient money so they don't exceed their credit line, even with holds. Or their bank doesn't freeze larger sums.
A spokeswoman with Florida Credit Union in Gainesville said debit transactions with a PIN are processed immediately.
A three-day "courtesy hold" is put on amounts with cards swiped without a PIN, because they are processed like credit cards. There may be a brief $1 hold to verify it is a viable account. Wachovia Bank does the same.
But if the hold amount drops their balance dangerously low, consumers risk bouncing checks - and then are subsequently subject to insufficient fund charges by their financial institution and returned check fees from the retailer, all of which add up quickly, increasing the negative effect on the account.
Weekend purchases - such as a long road trip that requires several fill-ups - cannot only reduce an account by hundreds of dollars, it can also take up to three business days for the true transaction to clear.
Todd Rousseau of Rousseau Enterprises, which operates six Exxon-Mobil stations and stores in Gainesville, said debit/credit purchases at his properties are processed through a third party, much like other "branded" oils, such as Shell and Chevron, and he has no control over the holding practice.
He said some holds last an hour, some much longer, and consumers should consult with their particular bank on how they handle them.
Jim Smith, president and CEO of the Florida Petroleum Producers and Convenience Store Association, said, "I have no earthly idea why they (the banks and credit card processors) are doing it. We don't have a dog in this fight.
"I don't understand the idea of withholding money vastly greater than the liability the consumer would have."
He said it was explained to him that this was another way someone with a stolen card couldn't go to several places (and spend) in one day.
"But there are other ways to put stops on his type of activity," he said.
"My members are all small businesses. With the price of gasoline bad enough, why place an additional burden on your customers?"
Marina Blomberg can be reached at (352) 374-5025 or email@example.com
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